Will the year 2020 definitively mark the break between the financial world and the world of the real economy under the effect of the accommodating policies of the central banks and the costly and laborious recovery plans?
As businesses grapple with operating losses caused by lockdown measures to contain Covid-19, millions are forced into unemployment and the US has been officially in recession since late July, Wall Street, passed the stupor of March 16, 2020 when, on the announcement of the pandemic, the composite index fell by 13%, aligning itself in the same order of magnitude as the crisis of 1929 and the shock of October 1987, has flew from record to record to end the year with a gain of 7.25%. On November 24, the Dow Jones reached the 30,000 point mark for the very first time in its history, proving right the Nobel Prize for Economics, Paul Krugman, who keeps saying that the stock market is not the economy.

Paul Krugman, Nobel Prize in Economics in 2008.

WHAT IS BAD FOR AMERICA IS SOMETIMES GOOD FOR THE MARKET. […] YOU MUST REMEMBER THREE RULES. FIRST, THE STOCK MARKET IS NOT THE ECONOMY. SECOND, THE STOCK MARKET IS NOT THE ECONOMY. THIRD, THE STOCK MARKET IS NOT THE ECONOMY […]. THE RELATIONSHIP BETWEEN STOCK PERFORMANCE – LARGELY DETERMINED BY THE OSCILLATION BETWEEN GREED AND FEAR – AND REAL ECONOMIC GROWTH HAS ALWAYS BEEN HALFWAY BETWEEN SOFT AND NON-EXISTENT.

Paul Krugman

On the last session of the year, the flagship index, up +0.65%, once again set a new record at 30,606.5, the S&P-500 aligned itself with the same increase (0.65 %) to 3.756. Over the year as a whole, the Nasdaq-100 and the Composite posted respective annual gains of +47.6% and +43.6%, driven by the surge in GAFAM + Netflix and Tesla: these 7 stocks representing more 100% of Wall-Street gains in 2020. Tesla exploded the counters with a gain of +720% over the year against 80% for Apple. The S&P rose by +16.3%.

After a rather euphoric year, we are wondering about the persistence of these stock market trends in 2021. The arrival of vaccines should restore morale to stock market traders. But it will above all be the continuation of massive injections of money by the American Central Bank (Fed) into the financial system and the maintenance of interest rates close to zero, which will continue to fuel investments on the equity markets, those of tech, pharmaceutical companies and laboratories in particular. The question obviously being to know which of the health and economic fundamentals or the financial and stock market enthusiasm will be stronger to neutralize its neighbor.