There is a major disconnect between the stock market and the underlying economy. The GDP numbers are down as well because the economy was brought to a stop and has not come back to pre-COVID 19 levels. Yet, the stock market is roaring. How is this possible?
A 2019 Federal Reserve Survey found that 40% of Americans did not have $400 in their accounts to cover emergency costs. That was before the pandemic rocked the world’s economy.
The savings rate, which is the percentage of personal income consumers save rather than spend, is at the highest it has been in years. The high savings rate is a reflection of the American peoples’ fear because they do not know the direction the economy is going to take.
COVID-19 has shown the fragile nature of the United States financial system, as well as other countries around the world.