London Daily

Focus on the big picture.
Thursday, Oct 22, 2026

How can Wall Street be so healthy when Main Street isn't?

How can Wall Street be so healthy when Main Street isn't?

The stock market is not the economy. Rarely has that adage been as clear as it is now. An amazing, monthslong rally means the S&P 500 is roughly back to where it was before the coronavirus slammed the U.S, even though millions of workers are still getting unemployment benefits and businesses continue to shutter across the country.

The S&P 500, which is the benchmark index for stock funds at the heart of many 401(k) accounts, ended Wednesday at 3,380.35 after briefly topping its closing record of 3,386.15 set on Feb. 19. It’s erased nearly all of the 34% plunge from February into March in less time than it takes a baby to learn how to crawl.

The U.S. and global economies have shown some improvements since the spring, when business lockdowns were widespread, but they are nowhere close to fully healed. The number of virus cases continues to rise across much of the United States, and federal and local politicians for the most part lack a strategy to contain it. Many industries, such as airlines, hotels and dining, could take years to recover from the damage.

The Federal Reserve and the U.S. government get a lot of the credit for the rally after pouring trillions of dollars into the economy. Profits also remained incredibly resilient for the stock market’s most influential companies, such as Apple and Amazon. Rising hopes for a potential vaccine to halt the pandemic, meanwhile, have encouraged investors to look past the current dreary statistics.

Here’s a look at how Wall Street has flourished while Main Street struggles:

THE MARKET’S BIG GUNS


The corner bars, the family restaurants, the hair salons and other small businesses across the U.S. that are teetering or closing for good aren’t listed on the stock market. Apple, Microsoft, Amazon, Facebook and Google’s parent company are, and movements in their stocks alone are dictating the action in the S&P 500 more than ever before.

The pandemic has accelerated work-at-home and other trends that have boosted Big Tech, and their profits are piling up. The five big tech-oriented giants are now worth a combined $7.6 trillion, and by themselves account for more than 22% of the S&P 500′s total value.

Because stocks with the biggest market values carry the most weight in the S&P 500, the movements of Big Tech matter much more than what airlines, cruise-ship operators or other still-struggling companies are doing. American Airlines is down more than 50% for 2020 so far, but its much smaller market value means it doesn’t move the needle like Big Tech. It would take 280 American Airlines to have the heft of one Apple.

The stock market has seen some broadening out of gains recently, with stocks of smaller companies doing better. But Big Tech has done the heaviest lifting in the S&P 500′s rally.

HELP FROM WASHINGTON


A famous saying on Wall Street is: Don’t fight the Fed. The central bank is doing everything it can to support the economy, from cutting interest rates to nearly zero to the unprecedented promise to buy even riskier corporate debt. It’s all aimed at ensuring lending markets have enough cash to run smoothly and to prevent prices from going haywire. Economists say the moves have helped avoid a 2008-09 style meltdown of the financial system.

The Fed has signaled that it will keep its benchmark short-term interest rate at nearly zero through at least 2022, and low rates are often like steroids for stocks. With Treasurys and other bonds paying relatively little in interest, some investors are turning instead to stocks, gold and other investments, boosting their prices.

Congress also approved an unprecedented amount of aid for the economy. Some portions of that aid have already expired, and another economic relief package is tied up in partisan rancor on Capitol Hill. But many investors seem to expect Washington to eventually come to a compromise and throw another lifeline to the economy.

Meanwhile, the economy is recovering but at a much slower pace than its rapid collapse in the spring. After shrinking at an annual pace of 32.9% in the April-June quarter, economists forecast it will rebound at a 20% annual pace in the July-September period. The unemployment rate is 10.2% and is expected to remain in the high single-digits through at least the end of this year.

THE NATURE OF THE MARKET


Investors are setting stock prices now based on where they see corporate profits heading in the future. And for many on Wall Street, the future looks brighter than the bleak present, in large part because of hopes that a vaccine for the new coronavirus could help things get back to normal.

“Main Street is the now, Wall Street is the future,” said Sam Stovall, chief investment strategist at CFRA Research.

Companies have begun final-stage testing of potential vaccines for COVID-19, and many investors are hopeful that something could be available either late in 2020 or within a year. A return to normal could help the economy get back on track and perhaps boost profits back to record levels. Stock prices tend to track with corporate earnings over the long term.

The same look-ahead mentality sent the stock market tumbling severely earlier this year, before the worst of the recession arrived. Stocks began falling in late February, a month before the number of layoffs began exploding, for example. The S&P 500 hit what turned out to be its low point on March 23, the same week that the government reported a record number of U.S. workers filed for unemployment benefits, nearly 6.9 million.

“Wall Street continues to look six to nine months down the road,” Stovall said.

Of course, many risks still remain for the market despite all its ebullience.

For all of Wall Street’s optimism, talks in Washington on more stimulus could break apart and deprive the economy of the aid investors say it crucially needs.

Rising tensions between the United States and China are also hanging over the market. The world’s two largest economies have longstanding trade issues, and the United States has recently been cranking up the pressure on Chinese technology companies.

And the virus remains the ultimate wild card. If a vaccine doesn’t hit the market within the next year, all the hope that has helped build up Wall Street’s rally could quickly vanish.

Newsletter

Related Articles

0:00
0:00
Close
Parliamentary Inquiry Highlights Urgent Need to Address Housing Shortage as Scottish Completions Hit Eleven-Year Low
United Kingdom and Singapore Sign Comprehensive Financial Agreement to Deepen Digital and Sustainable Market Ties
Greggs Announces Plan to Close Four Manufacturing Facilities and Cut Seven Hundred and Forty Jobs
International Monetary Fund Raises United Kingdom Economic Growth Forecast While Warning of Inflationary Pressures
Energy Security and Net Zero Committee Urges Government to Shift Policy Costs Onto Gas to Lower Household Bills
Housebuilding Across Scotland Plummets to Eleven-Year Low Despite Government Pledges to Tackle National Housing Emergency
Greggs Announces Factory Closures Across Northern England and Scotland Affecting Seven Hundred Forty Jobs
United Kingdom and Singapore Conclude Eleventh Financial Dialogue in Singapore to Deepen Cooperation on Digital Finance and Capital Markets
Energy Security and Net Zero Committee Urges Government to Shift Policy Costs to Gas Bills and Tap Windfall Profits to Lower Consumer Prices
British Broadcasting Corporation Announces Major Cost-Cutting Overhaul to Close Linear Broadcast Services for Television Channels BBC Three and BBC Scotland Alongside Digital Radio Station BBC Radio Four Extra
London Capital Markets Face Renewed Scrutiny After High-Profile Offerings Underperform Post-Listing
Green Party Wins Historic First Westminster Parliamentary By-Election in Gorton and Denton
Environment Secretary Emma Reynolds Unveils Sweeping Regulatory Overhaul for English Water Industry
United Kingdom Health Security Agency Confirms Thirty-Four Cases in Kent Meningitis Outbreak
Ministry of Defence Prepares Heat Pump Subsidy Cuts to Fund Urgent Military Modernization
British and European Union Officials Schedule Long-Awaited Bilateral Leaders Summit for November Twentieth
Bank of England Governor Andrew Bailey Urges Strict Fiscal Credibility to Protect British Bond Markets
United Kingdom Inflation Rises to Three Point One Percent Driven by Escalating Fuel Costs
Profit Warnings Among London-Listed Companies Reach Two-Year High Amid Global Energy Shocks
Chancellor John Healey Signals Targeted Tax Changes on Banks and London Corporate Offices Ahead of Budget
British Government Reallocates Twenty-Five Per Cent of International Climate Finance to Global Biodiversity Projects
Initial British Carbon Border Taxes Set to Undercut Parallel European Union Tariffs on Industrial Imports
Whitehall Prepares National Zero-Interest Loan Initiative to Accelerate Domestic Heat Pump and Solar Adoption
European Union Offers British Automakers Access to Hybrid Vehicle Trade Protections Subject to Strict Regulatory Alignment
British Probation Officers Threaten Widespread Industrial Action After Rejecting Five Per Cent Government Pay Offer
Microsoft Abandons Major British Artificial Intelligence Data Centre Citing Severe National Grid Power Constraints
United Kingdom Inflation Accelerates to Three Point Four Per Cent Ahead of Chancellor John Healey's Inaugural Autumn Budget
Surging Cloned Number Plates Severely Complicate Traffic Enforcement and Police Investigations
Mounting Opposition Challenges Planned Rollout of Autonomous Taxis Across London
Influential Think Tank Urges Rejoining European Union to Navigate Geopolitical Crises
Government Review Recommends Slashing Benefits to Fund Youth Employment Initiatives
Senior Minister Shabana Mahmood Seeks New Law Enforcement Pact With European Union
Airbus Executive Warns Britain Risks Losing Crucial Role in European Space Industry
Exorbitant Electricity Costs Push British Steelmakers to Worst Competitive Position in Three Years
British Food and Beverage Exports to European Union Collapse by Over a Third Since Brexit
Up to Twenty English Maternity Units Face Impending Closure Due to Safety and Staffing Crises
Government Declares Severe Drought Across Southern England Following Record Dry Spell
Corporate Profit Warnings Reach Two-Year High Amid Middle East Conflict and Rising Costs
International Monetary Fund Warns Chancellor John Healey Against Proposed Bank Tax Raid
Northern Ireland Secures Favorable Agricultural Export Agreement with European Union
Scottish Government Approves Major Offshore Floating Wind Farm Near Aberdeenshire
High Speed Two Rail Project Faces Three Billion Pound Cost Escalation on Initial Phase
National Health Service Warns of Winter Capacity Crisis Across English Hospitals
Tata Steel Confirms Two Thousand Job Cuts at Port Talbot to Fund Green Transition
Global Microchip Developer Announces Three Billion Pound Semiconductor Plant in Cambridge
United Kingdom Artificial Intelligence Safety Institute Proposes Mandatory Licensing for Generative Models
United Kingdom Commits Additional Long-Range Weapons and Air Defenses to Ukraine
British Chancellor Overhauls Infrastructure Financing to Bypass Borrowing Constraints
Bank of England Holds Benchmark Interest Rate at Four Point Five Percent
First Minister Rhun ap Iorwerth Confirms Constitutional Discussions Over Welsh Independence During Initial Bilateral Call with Prime Minister
×