What explains the disconnect between the economy and stock market?

December 08, 2020

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.