![]() ![]() The relationship between stock performance – largely driven by the oscillation between greed and fear – and real economic growth has always been somewhere between loose and nonexistent”. Third, the stock market is not the economy (…). Second, the stock market is not the economy. First, the stock market is not the economy. In one of his influential New York Times columns, Paul Krugman (2020) said out loud what many people were thinking: “Whenever you consider the economic implications of stock prices, you want to remember three rules. ![]() Now, they are behaving as if the millions of people infected, the 400,000 deaths, and the containment of half the world’s population will have no economic impact after all. They first ignored the pandemic, then panicked when Europe became its epicentre. Since the beginning of the crisis, stock prices seem to be running wild. 2020), the reaction of stock markets raises serious concerns. ![]() Is anything strange about the stock market behaviour in the time of COVID-19? As the world suffered from the worst economic crisis since the Great Depression (Baldwin and Weder di Mauro 2020a, 2020b, Bénassy-Quéré and Weder di Mauro 2020, Coibon et al. In March 2020, it took only one month for the S&P 500 to lose one-third of its value, while it took one year for the subprime crisis to decline the same amount, and one year and half for the dotcom bust. 9, 2007) and the COVID-19 crisis (peaked on Feb. Note: This figure compares the drop of the S&P 500 index during the dot-com crisis (which peaked on March 24, 2000), the subprime crisis (peaked on Oct. ![]()
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