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Wednesday, 5 August 2020

Correlation between consumer sentiment and S&P 500 diverges during pandemic

As the pandemic continues to bite, consumer sentiment and the stock market are moving in opposite directions as the S&P 500 continues its stimulus-fuelled surge while the real economy craters. Visual Capitalist associates this disjoint with S&P 500 tech giants that have rocketed during corona in contrast to the majority of other sectors that have been rocked by lockdown restrictions. The Federal Reserve has also injected the equity markets with rocket fuel by becoming the buyer-of-last-resort of corporate debt. The central bank has bought bns of USD in corporate bonds and ETFs in an effort to supply liquidity to the private sector and support balance sheets. This has helped to rescue investor confidence in the stock market, encouraging risk on sentiment regardless of underlying fundamentals.

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