Has the Stock Market Become Less Representative of the Economy?

In the summer of 2020, with the U.S. economy bearing the impact of the COVID-19 pandemic, the unemployment rate was as high as it had been any time since 1948, and the NASDAQ and the S&P 500 indices reached their highest values ever. This dramatic difference in trajectories between unemployment and the stock market raises the questions of how much the stock market reflects the health of the American economy and whether in recent years it does so less than it used to. In a new paper, we explore these issues for the period 1950-2019 for a subset of our … Read more