Wednesday September 23, 2020

Analysis: Mind the gap between stock market euphoria and economic reality

One of the assumptions underlying the soaring stock market is that the world will experience an enormous economic rebound once the pandemic is near its end, but it is a big assumption to make

13th September, 2020
The DAX Index curve on display inside the Frankfurt Stock Exchange in Germany last March. Since the end of March stock markets have rebounded strongly. Photo: Alex Kraus/Bloomberg

When the world’s stock markets crashed last March, there was an obvious and terrifying explanation – the Covid-19 pandemic.

In the weeks between late February and late March, share prices fell by about a third as countries imposed lockdowns to curtail the spread of the disease. The prognosis was for an economic calamity not seen since the Great Depression of the 1930s.

Since the end of March, markets have rebounded strongly. In most...

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