Key Focus

  • Especially when mistrust of news media is high, they tend to rely on how people they know respond to news. This process of evaluation takes time, which is why stock markets do not respond to news suddenly and completely, as conventional theory would suggest. The news starts a new trend in markets, but it is sufficiently ambiguous that most smart money has difficulty profiting from it.
    Of course, it is hard to know what drives the stock market, but we can at least conjecture ex post, based on available information.1
    There are three separate phases of the puzzle in the US: the 3% rise in the S&P 500 from the beginning of the coronavirus crisis, on January 30, to February 19; the 34% drop from that date until March 23; and the 42% upswing from March 23 to the present
  • At a time when genuine news suggests that equity prices should be tanking, not hitting record highs, explanations based on crowd psychology, the virality of ideas, and the dynamics of narrative epidemics can shed some light.
    NEW HAVEN - The performance of stock markets, especially in the United States, during the coronavirus pandemic seems to defy logic.


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High Level Topics

  • INVESTORS
  • STOCK
  • STOCK-MARKET
  • ECONOMIC
  • High Level Abstractions

  • INVESTORS(3, 0 Order)
  • ( INVESTORS )(3, 0 Order)  top
  • STOCK(5, 0 Order)
  • ( STOCK )(5, 0 Order)  top
  • ( STOCK, INVESTORS )(1, 1st Order)  top
  • ( STOCK, MARKETS )(2, 1st Order)  top
  • ( STOCK, UPSWING )(1, 1st Order)  top
  • ( STOCK, TRUMP )(1, 1st Order)  top
  • ( STOCK, THE_S )(1, 1st Order)  top
  • ( STOCK, PROFITING )(1, 1st Order)  top
  • ( STOCK, POLITICIANS )(1, 1st Order)  top
  • ( STOCK, MISTRUST )(1, 1st Order)  top
  • ( STOCK, MEDIA )(1, 1st Order)  top
  • ( STOCK, IMPEACHMENT )(1, 1st Order)  top
  • ( STOCK, GREAT_RECESSION )(1, 1st Order)  top
  • ( STOCK, GLOBAL )(1, 1st Order)  top
  • STOCK-MARKET(4, 0 Order)
  • ( STOCK-MARKET )(4, 0 Order)  top
  • ECONOMIC(3, 0 Order)
  • ( ECONOMIC )(3, 0 Order)  top
  • References

    • ( INVESTORS )  top
    • (Read more)   top ... mystery becomes, until one considers possible explanations based on crowd psychology, the virality of ideas, and the dynamics of narrative epidemics. After all, stock-market movements are driven largely by investors'assessments of other investors'evolving reaction to the news, rather than the news itself. That is because most people have no way to evaluate the significance of economic or scientific news
    • (Read more)   top Why didn't the stock market "predict" the coming recession by declining before the downturn started.1 One conjecture is that a pandemic wasn't a familiar event, and most investors in early February just weren't convinced that other investors and consumers paid any attention to such things, until they saw a bigger reaction to the news and in market prices
    • (Read more)   top The S&P 500 increased fivefold from its bottom on March 09, 2009, to February 19, 2020. Most people have no idea what's in the Fed plan or the CARES Act, but investors did know of one recent example when such measures apparently worked. Stories of smaller but still significant stock-market collapses and strong recoveries, a couple of them from 2018, were widely...
    • ( STOCK )  top
    • ( STOCK, INVESTORS )  top
    • (Read more)   top
      One conjecture is that a pandemic wasn't a familiar event, and most investors in early February just weren't convinced that other investors and consumers paid any attention to such things, until they saw a bigger reaction to the news and in market prices
    • ( STOCK, MARKETS )  top
    • (Read more)   top
      NEW HAVEN - The performance of stock markets, especially in the United States, during the coronavirus pandemic seems to defy logic.
    • (Read more)   top Especially when mistrust of news media is high, they tend to rely on how people they know respond to news. This process of evaluation takes time, which is why stock markets do not respond to news suddenly and completely, as conventional theory would suggest. The news starts a new trend in markets, but it is sufficiently ambiguous that most smart money has difficulty profiting...
    • ( STOCK, UPSWING )  top
    • (Read more)   top ... separate phases of the puzzle in the US: the 3% rise in the S&P 500 from the beginning of the coronavirus crisis, on January 30, to February 19; the 34% drop from that date until March 23; and the 42% upswing from March 23 to the present.
    • ( STOCK, TRUMP )  top
    • (Read more)   topFour days later, Trump signed the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, promising aggressive fiscal stimulus.1
      Both of these measures, and similar actions in other countries, were described...
    • ( STOCK, THE_S )  top
    • (Read more)   top ... similar actions in other countries, were described as resembling the actions taken to counter the 2008-09 Great Recession, which was followed by a gradual but ultimately huge increase in stock prices. The S&P 500 increased fivefold from its bottom on March 09, 2009, to February 19, 2020.
    • ( STOCK, PROFITING )  top
    • (Read more)   top The news starts a new trend in markets, but it is sufficiently ambiguous that most smart money has difficulty profiting from it.
      Of course, it is hard to know what drives the stock market, but we can at least conjecture ex post, based on available information.1
      There are three separate phases of the puzzle...
    • ( STOCK, POLITICIANS )  top
    • (Read more)   top President Donald Trump's impeachment trial, which ended February 5, still dominated talk in the US, and many politicians apparently still found it counterproductive to raise alarms about a hypothetical new enormous tragedy looming.
      The second phase began when the S&P 500 plummeted 34% from February 19 to March 23,...
    • ( STOCK, MISTRUST )  top
    • (Read more)   topEspecially when mistrust of news media is high, they tend to rely on how people they know respond to news. This process of evaluation takes time, which is why stock markets do not respond to news suddenly and completely, as...
    • ( STOCK, MEDIA )  top
    • (Read more)   topEspecially when mistrust of news media is high, they tend to rely on how people they know respond to news. This process of evaluation takes time, which is why stock markets do not respond to news suddenly and completely, as conventional theory...
    • ( STOCK, IMPEACHMENT )  top
    • (Read more)   top President Donald Trump's impeachment trial, which ended February 5, still dominated talk in the US, and many politicians apparently still found it counterproductive to raise alarms about a hypothetical new enormous tragedy looming.
      The...
    • ( STOCK, GREAT_RECESSION )  top
    • (Read more)   top
      Both of these measures, and similar actions in other countries, were described as resembling the actions taken to counter the 2008-09 Great Recession, which was followed by a gradual but ultimately huge increase in stock prices. The S&P 500 increased fivefold from its bottom on March 09, 2009, to February 19, 2020
    • ( STOCK, GLOBAL )  top
    • (Read more)   top Why would investors give shares their highest valuation ever right after the announcement of a possible global tragedy. Interest rates did not fall over this period. Why didn't the stock market "predict" the coming recession by declining before the downturn started.1
      One conjecture is that...
    • ( STOCK-MARKET )  top
    • (Read more)   top Understanding the Pandemic Stock Market Jul 7, 2020 ROBERT J. SHILLER The worse economic fundamentals and forecasts become, the more mysterious stock-market outcomes in the US appear. At a time when genuine news suggests that equity prices should be tanking, not hitting record highs, explanations based on crowd psychology, the virality of ideas, and the...
    • (Read more)   top ... afloat. shiller128 Drew AngererGetty Images NYSEUSstockmarket Understanding the Pandemic Stock Market ROBERT J. SHILLER The worse economic fundamentals and forecasts become, the more mysterious stock-market outcomes in the US appear. At a time when genuine news suggests that equity prices should be tanking, not hitting record highs, explanations based on crowd psychology, the virality of ideas, and the...
    • (Read more)   topMost people couldn't get a handle on it immediately, let alone imagine that others who might influence market prices were doing so. As the stock-market downturn proceeded, vivid stories appeared of hardship and business disruption caused by the lockdown
    • (Read more)   topMost people have no idea what's in the Fed plan or the CARES Act, but investors did know of one recent example when such measures apparently worked. Stories of smaller but still significant stock-market collapses and strong recoveries, a couple of them from 2018, were widely recalled. Talk of regrets about not buying at the bottom then, or in 2009, may have left the impression that the market had fallen...
    • ( ECONOMIC )  top
    • (Read more)   topUnderstanding the Pandemic Stock Market Jul 7, 2020 ROBERT J. SHILLER The worse economic fundamentals and forecasts become, the more mysterious stock-market outcomes in the US appear
    • (Read more)   top... employment, what could possibly be keeping share prices afloat. shiller128 Drew AngererGetty Images NYSEUSstockmarket Understanding the Pandemic Stock Market ROBERT J. SHILLER The worse economic fundamentals and forecasts become, the more mysterious stock-market outcomes in the US appear
    • (Read more)   top ... equity prices should be tanking, not hitting record highs, explanations based on crowd psychology, the virality of ideas, and the dynamics of narrative epidemics can shed some light. The more economic fundamentals and market outcomes diverge, the deeper the mystery becomes, until one considers possible explanations based on crowd psychology, the virality of ideas, and the dynamics of narrative epidemics