Why the performances of listed firms are out of kilter with the postlockdown economy
In contrast with forward-looking equity markets, government GDP numbers are backward-looking
The SA economy had never faced such an abrupt cessation of trade and economic activity as with the start of the nationwide lockdown on March 27. The same can be said for other economies around the globe. As economies begin to reopen, many investors have been left scratching their heads — the rebound in financial markets paints a very different picture from the economic outlook. How is it possible for financial markets to increase in value, when the economy is shrinking?
It is not surprising that markets experienced some of the sharpest falls in asset prices during the first quarter of 2020. The JSE all share index lost more than 30% from the start of the year until March 23. Also apparent is the speed of the recovery thereafter — from March 23 (the bottom of the sell-off) the market gained more than 40% to July 31, making Covid-19 seem like a mere short-term disruption...
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