KW: If you’ve wondered how the stock market can be so disconnected from the economy, you’re not alone. It shows you just how distorted markets have become. But can it last forever? Two senior International Monetary Fund officials write: “This divergence raises the specter of another correction in risk asset prices should investors’ attitude change, posing a threat to the recovery,” the blog says. “So-called bear equity market rallies have occurred in the past during periods of significant economic pressures, only to unwind swiftly.” They also add: “Recent market stability may just represent a period of calm ahead of stormier waters as the compounding negative economic effects of job losses, reduced spending and business closures weighs on the outlook.”
Has the stock market ever seemed so disconnected from reality? “Debt levels are rising, and potential credit losses resulting from insolvencies could test bank resilience in some countries.”