Three open questions on Stock Exchanges

This chart shows the development in the US stock markets and economy (proxied by the unemployment rate). Source: own on Bloomberg data.

As an economist ‘raised’ within global investment banks, I know (too well) the sometimes counter-intuitive stock market movements. I understand that the markets’ logics go well beyond the happenings of the day. I am familiar with the fundamental stock markets rule of ‘buy on rumour, sell on facts.’

But I have been raised to know that there are some ethical limits. Something that is even beyond ruthless, greedy, and all other adjectives that we attach to market players. Today we have gone beyond one of those limits. The U.S. Bureau of Labor and Statistics has announced peace-time record-high unemployment of 14.7%, with many millions of unemployed yet to be counted, as they have officially ‘left’ the workforce. At the same time, in New York — the same city with 185K cases and 19K deaths — U.S. stock markets were posting hefty gains (between 1.8% and 3.9% across different indices, as I write).

Now, let’s put these numbers in perspective. An increase of 1.8% of the U.S. total stock market adds approximately 640bn USD to the value of corporate America. That is exactly a year worth of salaries of the people who lost their jobs in April. Makes sense.

Am I moralist? I don’t give a damn. And in any case ‘moral’ is exactly what we have lost, so: bring it on.