Markets and the economy: Two staggering drunks
Business Daily
BBC
4.4 • 816 Ratings
🗓️ 8 May 2020
⏱️ 19 minutes
🧾️ Download transcript
Summary
Why are stock markets so buoyant as the global economy slides into a possible coronavirus-induced depression? Some 33 million Americans have lost their jobs in the past two months of the pandemic, yet the Nasdaq market is now higher than it was at the start of the year.
The financial markets and the economy have been described as two staggering drunks tied together by a rope. Manuela Saragosa explores this odd analogy and how it applies to the current disconnect between share prices and jobless claims, with the help of Jane Foley, financial strategist at Rabobank.
Meanwhile emerging markets are experiencing unprecedented financial outflows that risk undermining their ability to limit the damage Covid-19 does to their economies, according to Martin Castellano of the Institute of International Finance. Yet in the US, the Federal Reserve had no problem staving off financial calamity by promising to do whatever it takes, says Fed economist Julian Kozlowski.
Producer: Laurence Knight
(Photo: Drunken couple. Credit: Getty Images)
Transcript
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| 0:00.0 | Hello and welcome to Business Daily from the BBC with me, Manuela Saragossa. |
| 0:06.6 | Coming up, amid coronavirus lockdowns, the global economy is grinding to a halt. |
| 0:12.3 | So why don't stock markets seem to be taking much notice? |
| 0:15.5 | We saw an unprecedented amount of fiscal stimulus and a huge amount of monetary stimulus. Now, many equity |
| 0:23.2 | investors see that as providing hope for the future. While things may look rosy on Wall Street, |
| 0:30.0 | it's a different story in emerging markets. We're talking about more than $80 billion pulling out |
| 0:36.0 | of emerging markets. To put it in perspective, this is four |
| 0:39.5 | times what we have seen in the global financial crisis in 2009. That's all here in Business |
| 0:45.3 | Daily from the BBC. The economist Roger Farmer once said that the economy and financial markets are like two staggering drunks connected by a long rope. |
| 0:59.1 | Sometimes the stock market and the economy go in the same direction. |
| 1:02.4 | Sometimes they don't. |
| 1:03.7 | The point is that because they're tied together, they can never get too far apart. |
| 1:08.5 | Until now, it would seem. |
| 1:10.1 | While economies everywhere are expected to fall into |
| 1:13.1 | a deep recession, maybe even a depression, ever since late March, share markets have been staging |
| 1:19.1 | some big rallies, apparently lurching forward on their own brew. |
| 1:24.9 | The piano has been drinking. |
| 1:30.3 | My nectar is sweet. |
| 1:33.3 | Good morning, the top stories this morning. |
| 1:35.3 | The Futsi 100 rose 23 points to 5782. |
| 1:38.3 | That's despite the worst UK construction numbers ever recorded. |
| 1:42.3 | An 11% gain in the Dow doesn't it come around more than what, twice in a century? |
... |
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