Zoom Stock’s Surge Is Bad News for the Economy — Here’s Why

  • While the S&P 500 is still down about 6% year-to-date, Zoom’s shares have tripled in value.
  • Zoom’s popularity has exploded due to shelter-in-place orders.
  • Zoom keeps soaring despite investors being optimistic about the economy.

Zoom Video Communications’ (NASDAQ:ZM) stock price was on an uptrend before the pandemic started. But the outbreak pushed shares higher as lockdowns forced Americans to work from home, and more of them used Zoom’s video conferencing app.

Zoom’s shares have tripled in value since the start of the year. They continued to rise on Monday, soaring past $200.

Zoom has soared nearly 200% since the start of 2020. | Source: Yahoo Finance

The tech company is now worth more than the world’s seven biggest airlines.

Zoom’s shareholders must be pleased with the stock outperformance. But Zoom’s surge might not bode well for the economy’s outlook.

Zoom Should Be Trending Lower

Zoom is a stay-at-home trade. The company’s video conferencing app allows people to meet and do presentations virtually instead of in-person.

As being able to meet remotely is very convenient during a pandemic, Zoom’s daily participants have surged. They are now about 300 million, up from 10 million per day in December.

But as states are reopening, and if investors are optimistic about the economy, shouldn’t Zoom be trending lower?

Since hitting bottom on March 23, the S&P 500 has rallied 37% despite dismal economic numbers.

The S&P 500 rally continues despite negative news. | Source: Yahoo Finance

The stock market is rallying because investors think the worst is over.

The reality is that the economy probably won’t go back to the way it was before the pandemic, or at least, not for a very long time. That’s why Zoom keeps soaring.

The Economy Won’t Go Back To Normal

While Zoom is doing very well, this isn’t the case for most companies.

According to a Federal Reserve report released last week, economic activity fell sharply in…

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