Stock Market Meltdown Is Doomed to Get Worse: Wall Street Economist

  • The stock market looks set to secure a solid weekly gain, Friday’s downturn notwithstanding.
  • But that’s just the sugar rush from the $2 trillion stimulus package and a promising slowdown of coronavirus cases in China.
  • A famed Wall Street economist says the stock market still hasn’t priced in stagnant corporate profits and ballooning corporate debt.

The stock market made an impressive comeback this week, even if it did pare those gains on Friday.

As the $2 trillion dollar stimulus bill neared passage in Congress, the benchmarks mounted a forceful rally.

The broad stock market recovery carried the Dow (black), S&P 500 (blue), and Nasdaq (red) off their lows. | Source: Yahoo Finance

Boeing stock led the rally with an insane bounce off the relief package for airlines. That’s why the Dow did markedly better than the S&P 500 and Nasdaq

Some investors think the stock market crash might even be over.

In addition to the unprecedented emergency financial relief, China had welcome news for the world Tuesday. Authorities there announced they would lift the lockdown on Wuhan, the epicenter of the pandemic. New cases of coronavirus had been slowing consistently in China, reaching the single digits earlier in the month.

But that doesn’t mean the stock market meltdown is over.

Why the Stock Market Crashed So Quickly

This week’s rally was bigger than the six previous bounces since the market crashed in February. That doesn’t mean it will last.

Many economists and financial strategists were stunned and dismayed by how quickly the stock market crashed, and how far it fell from February’s all-time high levels.

The reason why the stock market crashed so drastically is valuations were incredibly frothy by January. That month we noted the perilously high stock prices relative to corporate earnings, alongside record overvaluations relative to GDP.

The coronavirus pandemic – and the worldwide lockdowns to contain it – cut through that tall layer of froth like a hot…

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