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When shares and the economy diverge

I don’t know about you, but don’t you find the recent stock market rebound a bit puzzling? If so, you are not alone.

The last few weeks have produced plenty of examples of poor economic indicators, but up until the past week stock markets have performed with a fair bit of exuberance.

So why the apparent disconnect?

You see, markets are forward-looking beasts. Meaning current values reflect what the market (in its aggregated view) expects to happen in the future. If things don’t turn out as bad as expected, poor economic news can be greeted with a positive stock reaction.

Looking ahead, who knows what is going to happen next.

I would, however, advise that you have a wee peek at the (very short) video below, which suggests that history is on our side here. 

Again finally, if you are at all worried or indeed fancy a virtual coffee with me, please do let me know. I’d be very happy to hear from you.

Dimensional Video