The Sopranos- Season 1 Episode 5 “College”
Meadow Soprano speaking to her father Tony: “Are you in the mafia?”
Tony: “That’s total crap. Who told you that?”
Meadow: “I lived in the house all my life. I’ve seen police come with warrants. I’ve seen you going out at three in the morning.”
Tony: “So, you’ve never seen Doc Cusimano going out at three in the morning on a call?”
Meadow: “Did the Cusimano kids ever find $50,000 in Krugerrands and a .45 automatic when they were hunting for Easter eggs?”
Tony: “There is no mafia.”
As we discussed in The Fed’s Monetary Animal House, appearances can be deceiving. Most major stock indexes are up double-digit percentages year to date, implying significant economic growth and a booming outlook for businesses, workers, and households.
Economic activity is well off the lows seen in April and May. The same data also suggests we are nowhere near the same level of activity seen pre-COVID. To quote New York Fed President John Williams, “we are still in a profound recession”-12/2/2020.
Is the economic rebound real and durable, or a false positive supported by record levels of artificial stimulus? Does current investor confidence hinge on more trillion-dollar stimulus agreements? Although we have our suspicions, we won’t know the answers for quite some time.
Maybe the mafia doesn’t exist, and perhaps Wall Street’s exuberance is correctly foreshadowing an economic boom.
The Economy Versus The Market
In Bloomberg’s Opinion section, Nir Kaissar analyzes the historical relationship between the economy and equity market returns. Using GDP...