The good news on the stock market and the parable of the ox
For those of us who had faith in the economy and Donald Trump, and who therefore stayed in the stock market, it looks as if our loyalty is being rewarded. The stock market is rising, something it did even before the stellar employment numbers came out today. The usual doom-and-gloomers on the left are trying to downplay what's happening as a short burst of irrational exuberance that reality will quickly temper. The parable of the ox says the naysayers are wrong.
The news from the stock market and the labor market shows that the U.S. economy is rapidly rebounding:
The Dow Jones Industrial Average surged 829 points or 3.15 percent, while the S&P 500 jumped 2.62 percent.
New economy stocks helped the tech-heavy Nasdaq touch an intraday all-time high of 9,842, but the index closed just under that level with a gain of 2.06 percent.
Amazon, Microsoft and Apple, which hit a fresh record, all contributed to the gains lifting the Nasdaq 100 Index.
The U.S. economy added 2.51 million jobs in May as the unemployment rate fell to 13.3 percent, according to a report released Friday morning by the Labor Department. Wall Street analysts surveyed by Refinitv were expecting the economy to lose 8 million jobs as the unemployment rate spiked to 19.8 percent.
This growth is what Jason Furman, an Obama economist and Harvard professor, predicted near the end of May, to the Democrats' great consternation:
"We are about to see the best economic data we've seen in the history of this country," he said.
The former Cabinet secretaries and Federal Reserve chairs in the Zoom boxes were confused, though some of the republicans may have been newly relieved and some of the democrats suddenly concerned.
"Everyone looked puzzled and thought I had misspoken," Furman said in an interview. Instead of forecasting a prolonged Depression-level economic catastrophe, Furman laid out a detailed case for why the months preceding the November election could offer Trump the chance to brag — truthfully — about the most explosive monthly employment numbers and gross domestic product growth ever.
The lockdown wasn't the coffin lid on a moribund economy. It was, instead, the lid on a pressure cooker, waiting to explode. This was very disappointing to the left. The Washington Post provided the best example because it had already written its report about the lousy employment numbers when the legitimate news finally emerged:
Meanwhile, Paul Krugman was desperately hoping that the Bureau of Labor Statistics was gaming the numbers. Surely things couldn't be so good after a lockdown and riots!
Some people believe that what we're seeing is momentary exuberance before the reality kicks in about all the damage from the last few months of Democrat-orchestrated economy chaos. I don't think this is exuberance. Across the country, millions of investors, whether professionals or amateurs, big investment firms or small, are looking down the line to the election and after. The market's boom, after a painful but necessary correction, means they're all coming to the same conclusion: things are looking up.
Importantly, we're seeing the result of millions of independent investment decisions. This is more reliable than masterful pronouncements from a pundit, professor, or government agency — and these individual decisions are where the parable of the ox comes in.
James Surowiecki, in The Wisdom of Crowds, talked about an experiment Francis Galton, the father of modern statistics, ran at a 1906 county fair. Eight hundred people entered a competition to guess the weight of an ox that proved to weigh 1,198 pounds. While the winner was close enough, he was a long way away from the actual weight. However, when Galton gathered all 800 guesses and averaged them, he discovered that the average of 800 best guesses was 1,197 pounds.
The market optimism we're seeing is the equivalent of that averaging. No investor will perfectly predict each stock or the actual movements of the stock market. Nevertheless, taken together, all these investors are telling us that Professor Furman was correct.
Things are looking up. Way, way up. And here's another happy thought: it must kill the Democrats to know that the riots' single biggest long-term effect will be to have ended the lockdown and set the market on an extravagant bull run in the lead-up to the election.