The Nasdaq and S&P500 made new all-time highs last week. That leads many people to believe the economy must be doing OK. But as Peter Schiff explained in his podcast, the very thing that’s helping Wall Street boom is crushing the actual Main Street economy.
If you really stop and think about it, the continued stock market climb should be a bit perplexing. After all, the economy was effectively shut down for weeks and governments continue to impose many restrictions to this day. Unemployment has skyrocketed and we remain in the midst of a deep recession. And yet we have a booming stock market. Peter said surging stocks are actually misleading a lot of people into believing that the economy is stronger than it actually is.
Because somehow, this strong stock market must somehow reflect the fact that we have this v-shaped recovery. We don’t. We only have a v-shaped recovery in the stock market. We don’t have any recovery really in the real economy.”
In fact, there are plenty of signs that the economy is going to continue to struggle longterm. We just saw the worst quarter ever in mortgage delinquencies. Meanwhile, businesses are shutting down and bankruptcies are at a 10-year high. Americans owe billions in back rent. There is a rising number of over-leveraged zombie companies. And a tsunami of defaults and bankruptcies are on the horizon.
And yet, analysts say we just experienced the shortest bear market in history. In other words, it was the shortest timespan from a bear market to record highs.
So, this was the shortest bear market ever, yet it’s taking place in arguably maybe the weakest economy ever. So, you really have a divergence between Wall Street and Main Street.”
Some have speculated that the booming stock market has tempered the need for fiscal stimulus. But why do we need a falling stock market to create political pressure for government stimulus? As Peter put it, the only thing the government can actually stimulate is the stock market.
That’s the only place it works.