What explains the disconnect between the economy and stock market?

December 08, 2020
Share |

The recovery in the equity markets has confounded some, given the damage to the economy caused by the COVID crisis. However, it’s important to remember that stock prices are forward-looking in nature. In other words, investors have continued to look past the near-term struggles facing businesses and consumers, and, instead, they have begun to eye prospects of widely available vaccines by next spring, which should allow for a return to more normalcy in economic activity and support a rebound in corporate profits.