Stock market record while the world is on fire

 

Extreme weather
The world is on fire - the stock market is breaking records

Andreas Cervenka

Reporter and economic commentator

This is a commenting text. Analysis and positions are the writer's.

Updated 11.00 | Published 10.33

Quick version

• The American stock market has increased by almost 1,000 percent since 2009, while the Swedish one has risen by 800 percent. This despite wars, pandemics and extreme weather, which shows the stock market's resilience to global events.
• Despite drama such as the war in Ukraine and natural disasters such as Hurricane Helene, the financial markets have been stable. For example, the US stock market has increased by 33 percent during the recent troubled period in the Middle East.
• Stock market performance over the past 15 years has outperformed economic growth, with large companies benefiting. At the same time, many people experience dissatisfaction with their living situation, which indicates a disconnection between stock market values ​​and people's well-being.

Smoke rises into the sky after an Israeli attack on the Gaza Strip. Photo: Ariel Schalit / TT

If the stock market is a value gauge of humanity's success, we have every reason to stretch ourselves. Since bottoming out in early 2009, the US stock market has returned nearly a thousand percent, including dividends.

In Sweden, the corresponding figure is 800 percent, or over 15 percent a year. That is well above the historical average.

It doesn't matter what kind of misery the world has thrown out; wars, pandemics, inflation, extreme weather and hell and his aunt: the stock market has always elegantly slipped away and continued to fuel gains.

Today marks one year since Hamas's attack on Israel and the beginning of the most unstable period in the Middle East in fifty years. The US stock market has climbed 33 percent this year.

After Russia's invasion of Ukraine at the beginning of 2022, it has sometimes felt like living in the middle of a dramatization of the brochure "If the war comes". Nuclear weapons and canned goods have made a comeback in the collective consciousness.

The stock exchange: is that all you have to offer? In Stockholm, the index is almost 20 percent higher than at the outbreak of war.

In less than a month, the United States will choose between Kamala Harris and Donald Trump. A recent report from the apolitical Committee for a Responsible Federal Budget shows that if Donald Trump wins, the US national debt will increase by twice as much as if Kamala Harris takes home the victory.

The report states that regardless of who becomes president, he has a whole series of goodies to look forward to: "record high debts, large structural deficits, rising interest expenses and threatened insolvency in several critical welfare systems".

The development in the US is part of something that has been going on throughout the world since 2009, the amount of debt has grown at a significantly faster rate than the economy, another trend that the stock market has shrugged off.

Another yawning factor is climate change. Hurricane Helene, which swept across the southeastern United States, is estimated to have killed more than 220 people, the deadliest weather event since Katrina in 2004.

The financial damages are estimated at several hundred billion kroner. But the insurance companies are still not expected to be hit that hard. Less than one percent of the houses that were destroyed in seven states had flood insurance, writes the Washington Post.

It is a combination of previous disasters making insurance too expensive, that insurance companies simply do not want to insure anymore and that Helene reached areas where one could not even in their wildest imagination imagine becoming a victim of extreme weather.

Already in 2015, the French insurance giant Axa declared that the company would stop investing in coal companies, in purely financial self-interest.

”We have no choice. A world that gets two degrees warmer may be insurable, a world that gets four degrees warmer is definitely not,” explained CEO Henri de Castries.

Since then, the world's consumption of coal has increased. The world's largest listed producer of coal, Chinese Shenhua Energy, has climbed 130 percent on the stock market in the last five years. Runner-up Glencore, headquartered in Switzerland, has risen more than 80 percent. Oil giant Exxon Mobile has doubled in value since the financial crisis.

A strange thing about the rise in the stock market over the past fifteen years is that it has fared much better for stocks than for the economy in general.

This can be seen if you compare the value of the stock market with the gross domestic product GDP. At the beginning of 2009, the combined value of the US stock market was roughly 50 percent of GDP, today the figure is almost 200 percent.

A curve that has gone in the opposite direction is the one that shows what people give the overall development for grades.

According to a Gallup poll, less than half of Americans are "very satisfied" with their lives. It is as low as in the years after the financial crisis and a sharp decline since 2020. In the annual SOM survey conducted by Gothenburg University last year, 75 percent of Swedes stated that our country is heading in the wrong direction, compared to 39 percent in 2012.

This, in other words, after a stock market return of several hundred percent. How ungrateful can one be!

There are a number of different ways to interpret this. About the stock market, it is usually said that it does not show how the economy looks today, but how it will become. If that is true, the brighter future is ours.

Another possible explanation is that the stock market has become more and more disconnected from the real economy and is in some kind of bubble.

A third, that the economy is dominated by a number of giants who shave off an increasingly large share of the cake and that these companies are owned by a small group of wealthy people so that the crumbs that fall to so-called ordinary people are not enough to keep them in a good mood.

The fourth interpretation is most troubling. What if the stock market prices are not a barometer of how well things are going, but the opposite? So that all the profits that are produced are partly at the expense of other, more difficult to measure values, such as the environment and social cohesion? The analysis company Economist Intelligence Unit shows that democracy in the world has been on ice for the last fifteen years. A period that thus coincided with a unique golden age for the world's stock markets.

If everything ends up in a shelter with inquisitive children, there is always a ready answer: stop whining. At least we were lucky with the stock market.