Economic Collapse: Stock Market as an Indicator

The severity of the economic impact from the COVID-19 pandemic is just now being recognized – and in a historical timeline just getting started. So far there have been three Federal initiatives totaling well over $2.3 trillion dollars(eventually to total between $4-$6 trillion).

The National Debt now sits at $24.5 trillion dollars.

The reality of what is occurring and the long-range impact to the economy is catastrophic. Thousands of businesses have closed their doors, never to reopen. Thousands more are struggling and their fate remains questionable. Millions of American’s have lost their jobs and countless more will.

The Federal government’s response is anemic at best. The $1,200 stimulus check that many are receiving pales in comparison to their lost revenue. Federal unemployment dollars will certainly be a help but is a short term stopgap measure. The bottom line is there are massive layoffs, businesses closing, inflation has started and many of those businesses and jobs will not be coming back.

Far too many in the mainstream media and elsewhere are using the stock market as an indicator for economic health. This is an effort based on a falsehood – which is the value of the stock market itself. Don’t get me wrong the economy was doing much better thus the stock market deserved to be elevated, but not nearly to the level it was – or is.

Stock Market/DOW Level

Look at the image at the top of this post. About one year ago the DOW was sitting at around 23,500. Today – the DOW sits at around 23,500. The market did rise at one point to over 29,000.

Should the market be at the level it is right now? The answer is simple: No.

Let’s compare December of 2018, to April of 2020:

12/2018:  DOW – 23,500 estimated

  • US economy booming
  • Record low unemployment rates for all Americans including African-Americans, Hispanics, and women
  • Wages trending upward
  • Manufacturing sectors reporting growth and expansion
  • US/Mexico/Canada Trade Deal just signed in November
  • Largest tax overhaul in U.S. history implemented in 2018

04/2020: DOW – 23,500 estimated

  • Trillions being added to National Debt(total amount unknown)
  • Worldwide pandemic causing sickness to over 2 million and 160,000 deaths
  • United States cases well over 700,000 with nearly 40,000 deaths
  • U.S. unemployment rate estimated to be between 13%-20%
  • Shelter-In-Place stays ordered across the nation
  • Tens of thousands of businesses closed
  • Many major food producers shutting down
  • Economic outlook in the United States, and the World = dismal

So much more could be added to the 04/2020 list but I believe the point has been made.  The stock market has already dropped from its high of over 29,000 and should be down closer to 14,000. The reality of current economic conditions is not reflected in the market – yet.

What Are We To Expect?

Over the coming month’s we are going to hear a lot of positive things coming out of government. This has to happen to denote hope and quell panic. Consumer confidence is extremely low and is a contributing factor to any “recovery” that may occur. What might be considered a recovery is really a pause for what is to eventually arrive.

Am I right? Does this make sense? Is everything going to be fine and return to normal?

Hey – what do I know? I’m just an unemployed writer with a propensity towards reality.

Take care all.

Rourke

16 Comments

Add a Comment