Bridging the chasm: Making sense of the stock/economy disconnect

Explaining unprecedented market fluctuations

Ken Frier of SECOR Asset Management

Ken Frier of SECOR Asset Management

Historically, changes in global equity prices have been closely related to changes in the global economy. However, this has not been the case for most of 2020.

The current "disconnect" has led many investors to ponder whether the magnitude of the equity market rally since March is justified. Is it possible for us to learn from the outcomes of similar episodes? This piece aims to quantify the stock/economy disconnect and analyses the outcomes of the large disconnects of the past. The land that time forgot? Why UK equities are in need of a vaccine The chart below shows the one-year global economic data change and the one-year return of global equities. We can see that the timing and amplitude of these series tend to coincide very closely...

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