A thread on divergence between economic data and market performance
When a coin is dropped from the top of a 50-story building, snapshots at 25th floor and again at 10th floor may be interesting for a photographer, or physicist (due to time frame) but it makes little difference.
That is the scenario with economic data (except its slower). Data is going to get worse.
It is hardly surprising that activity has slowed down dramatically when broad parts of the major economies have shut down in light of Covid-19.
One way of looking at this is to assume that the virus has disappeared and the damage has happened in the normal course of economy. We were not exactly sky-rocketing pre-Covid for that matter.
In any case, virus is not going to last forever.
Yes, i know it continues to effect in parts of the world, but the market fuelled by ample liquidity will act like its eliminated.
There have been few good signs. ICU numbers globally are falling even as infections continue.
The market is looking at a future without virus. The easy and accommodative monetary policy is not going anywhere quickly. They are here to stay. Lower for longer.
It's tough to look past the virus, but that's exactly what the market is doing. No point fighting this!
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