Why The Stock Market Is Rising But The Economy Is Falling

In this video we show you the reasons why the stock market is rising while the economy is falling. Very weird times, let's delve into it!

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For those who have been keeping track of the economy and the stock market, I’m sure you would have noticed, something very weird has been happening.

So on one hand you look at the stock market and you’d think we’re in the most productive stage possible. Over the last 2 months it is up by 35%!
However when you look at the economy how much businesses are actually producing, that is down. In the first quarter of 2020, the economy has shrunk by 4.8%, and in the 2nd quarter it’s predicted to shrink by a further 30%.

So it’s very weird times that we’re in. the stock market, the way people price businesses is up massively, but those businesses are producing less. And not just a little bit less, a whole lot less compared to last year and other previous years. What I want to do in this video is answer why! Why is this contradictory behavior happening!?

Let me explain. You see the way we measure how the economy is going, is through a figure called GDP. Gross Domestic Product. This measures the total value of goods produced and services provided in a country during one year.

As you can see up until 2019 this was growing at a steady rate. The economy was doing what it was supposed to do, and that is producing more and more each year. Until 2020 comes along, and something that no one could have ever predicted occurred.

A illness swept throughout the world, causing governments to take extreme action. Citizens were forced to stay at home. Businesses had to shut, and the economy basically halted in its tracks. This is what’s known as a black swan event.

Now, because people weren’t buying as much & businesses were shut, nothing was getting produced. So Gross domestic product, GDP, the figure that measures the economy went down dramatically! As I mentioned earlier it’s down 4.8% in the first quarter of 2020 for USA. This number is expected be -30% in the 2nd quarter of this year. (2)

But Obviously it’s not just the USA that’s been affected. It’s the whole world. The reason that we always use the USA as the benchmark is because it is the biggest economy.

As you can see this is GDP by country for 2017. USA is by some margin the biggest economy compared to everyone else. And the 2020 figures aren’t going to be looking nice, we can say that for sure.

But it’s not just the USA that’s been affected. China the 2nd largest economy in the world that’s obviously been affected as well. They had a massive halt in terms of the economy. It’s the same with Germany, Italy, the UK etc. The virus has impacted all of these countries. But let’s bring our focus back to the USA.

The USA’s economy is down and what we also need to mention, so is employment. People have lost a lot of jobs due to this poor economy.

As you can see the unemployment claims were normal at the start of this year. And then the end of March, April comes along and spike, the benefit claims shot up. It almost hit the 7 million mark in one week. As I say very interesting times.

Unemployment is now sitting at 14.7%. Which is up from just 3.5% at the start of this year. So I think it’s fair to say that economically we’re all battling.

But now we need to move on to the second part of the equation which is the stock market. The stock market, after it’s initial dip, is now up over 35%!
The S & P 500 has climbed almost 800 points, starting to come close to the all time high at 3,036 points.

The Dow Jones similar story it’s up almost 7,000 points, to a total of 25,500.

And USA’s last major index is also up. It’s up by over 400 points, over the past 2 months.

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DISCLAIMER: It's important to note that I am not a financial adviser and you should do your own research when picking stocks to invest in. These are just some of my viewpoints, by no means would I recommend watching one YouTube video and then immediately buying that stock. This video was made for educational and entertainment purposes only. Consult your financial adviser.