Stock Market Performance

Out of kilter. Soaring stock prices without substantive backing. As social chaos reigns the stock markets are rising? Where is the logic of that?


I’ve heard the theory from rabid capitalists that the market is the harbinger of the future, not a rear view mirror. Nonsense and hogwash.


Market value is a measure of investor belief in how well a company or industry will perform based on current conditions. You’d think the current market values would be much lower based on these conditions:

·        Unemployment is near 20%; recent report was off by 5 percentage points; latest reports have been corrected to reflect that fact

·        Pandemic didn’t merely upset the employment market and business operations; it changed the normal. Each new normal will need to be accommodated in the economy over time. Included are:

o   Work From Home protocols; supervision changes; measurement of productivity changes; pay scales change

o   Employment hubs have been physical, usually in downtowns. Now those hubs are not as necessary; how will this affect commercial real estate values and investment?

o   What industries will phase out of existence? Changing standards affect all businesses.

o   What new industries and businesses will be invented because of the changes?

o   Think about restaurants and personal service businesses; how will these change?

·        Commuting patterns have changed, too; how will this affect public transportation, automobile sales, services, etc.?

·        Fear of international markets and import/export operations may create isolationist trends. How will this affect our economy and its performance? What then will corporations do to safeguard their value in the market?

Returning to work after the pandemic has yet to occur broadly. There are signs this will happen throughout the nation in fits and starts. Reopening the door, however, is not a return to normal. No one knows what normal is anymore. It will be defined by reality as we conform to new conditions. That is not an indicator of strong financial performance.


Current stock values were grossly overvalued before the pandemic. Returning to those values today is without merit.


Investing is a good thing overall. But it should never be a crap game. Today’s action is just that and the odds do not favor the bettor. Beware.


June 11, 2020