Even amidst the COVID-19 pandemic, there are many reasons for the stock market’s buoyancy, Nigam Arora writes for MarketWatch, citing incentives in the industry to retirement-account purchases to behavioral biases. Initial U.S. jobless claims for the week hit 4.4 million on Thursday, pushing those unemployed above 26 million and making for an estimated 15% unemployment rate.
Many investors believe the stock market has gone bonkers, saying it has become totally divorced from the reality on Main Street. I agree that the stock market isn’t reflecting the economy. There are many reasons for it… Start out with the premise that even if unemployment reaches 20%, then 80% of the people are still employed.
A majority of the people who are losing their jobs earn less than average and work in service sectors. They typically do not invest in the stock market, as they generally do not have the resources to invest. People who generally invest in the stock market still have their jobs. They are still contributing to their 401(k)s, which is creating buying.
The benchmark stock market index S&P 500 is concentrated in Microsoft, Apple, Amazon, and Facebook. Investors believe these stocks are safe…
MacDailyNews Take: More reasons why stocks are rising even though 26 million people are out of work in the full article. It’s a disconnect alright, but, as Arora explains, the system is set up for investors to buy stocks and keep them in stocks.