A Perfect “V” Shape Recovery?

<image credit to: stockinvestor.com>

Why is Wall Street soaring while Main Street is burning? <source : nbcnews.com>

The terms “Wall Street” vs “Main Street” gets tossed around a lot in conversations about the financial industry recently and continue being headlines in major newspapers or financial portals.

Just months into the coronavirus crisis, many are already pointing to the striking contrast between what has happened to the real economy and financial markets a.k.a “Wall Street vs Main Street” conundrum.  “Mr Market “ is irrational, as usual, while millions of peoples around the world had lost their jobs due to this COVID 19 pandemic and economy are expecting to shrink with weaker consumer demand and lowest PMI, yet stock market soar, to a level almost same as in pre-COVID market environment, a perfect “V” shape recovery.

The huge divergence and disconnection between these two “streets “ caught many of us by surprise.

** Congratulation to those who have bought it during mid-March when the market hit the lowest level ( maximum pessimism ) before it rebounded strongly subsequently.

Disconnect the Dots: Main Street vs. Wall Street < source: schwab.com>

We (investors ), as well as world economist, try to understand or find answers for this “ disconnection”. Some said is because of wold central bankers are using “ultra-high-speed printers” and “larger helicopters “ to print and dump the money to the markets, increasing money supply and liquidity and of course some money may funnel into stocks market. Some attribute this surge in the stock market due to optimism of finding a vaccine as early as end 2020 and also re-opening of world major economies like US and European countries.

Stock Markets Are Surging. Is This A Bear Market Rally? <source:Forbes.com>

Some analyst said this is just a “dead cat bounce “ or bear market rally given much uncertainty in the world economy and huge unemployment remains even after the re-opening of the economy.

Well, nobody has the crystal ball to predict the future, whether it is a dead-cat bounce or real rally, what we can do as an investor is to adjust our investing amount in our portfolio up to our acceptable risk tolerance. We shouldn't try to “time the market” by trading in and out with market swings.

Whichever reason you use to justify this “ divergence “ or “ disconnection” between “Main Steet vs Wall Street “, Mr Market is just as “irrational” as it used to be.

Mr. Market : 市场如天空，变幻无穷。。。。莫测 <link:STE>

Stay Home, Stay Safe !!

Cheers !!

STE

Quote Of The Day :

“I've never been on Wall Street. And I care about Wall Street for one reason and one reason only because what happens on Wall Street matters to Main Street.” Ben Bernanke

Appendix:

Regression Line for world stock market:

Although the STI Index doesn’t show a “perfect V” recovery like S-REIT or S&P 500, it has also recovered more than +24% from the low in mid-March.