Coronavirus Economy & Stocks | National Review

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Traders watch President Donald Trump speak from the White House on a monitor on the floor of the New York Stock Exchange, March 13, 2020. (Lucas Jackson/Reuters)

A lot of people find it remarkable that the stock market has done well over the last seven weeks while the economy has been bleeding out. See here for an example, and here for some theories that have been put forward to explain the disjunction.

I don’t really see what the mystery is. Everyone realized that we were going to go through a major economic contraction, including massive job losses, before we actually did, and trading reflected that knowledge. As information about the scale of the economic problem we faced made it look more and more dire from roughly Feb 20 to March 23, markets declined. That they have partly bounced back since then suggests that markets are more optimistic about the economic hit we will take than they were at the low point are but still think it will be big. (We should always, of course, keep in mind that these anthropomorphic statements about markets are metaphorical.)

It would be weird if stocks acted the way these observers seem to think they should, e.g., falling on reports that jobs had been lost over the previous four weeks. It would mean that stock markets were extremely inefficient at processing information.

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Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.


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