Date: 2024-11-23 Page is: DBtxt003.php L0900-MBF-NYSE-Russell-3000-01a
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MONEY, BANKING and FINANCE
NYSE ... Russell-3000 |
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| STOCK MARKET PERFORMANCE OUT OF SYNC WITH ECONOMIC REALITY | |
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What explains the behavior of this stock market index?
The Covid-19 pandemic in early 2020 and the related econonic shutdown caused a massive drop in the Russell 3000 index. This was a reasonable reaction that reflected economic reality. On March 23rd, the US Federal Reserve moved to ensure that there would not be a total disruption of capital markets as happened in the banking crisis of 2008 which was a very sensible move on the part of the Federal Reserve. The response of the capital market has however, been somewhat surprising. The market has recovered and three months later is again at record levels even though the underlying economic realities are dangerously weak. This may not matter to the capital markets because the supply and demand situation in the capital markets does not reflect very well the supply and demand situation in most households and in struggling businesses faced with losses. |