Coronavirus is causing an economic crisis, yet the stock markets are booming. Here's why

If, as expected, equities remain solid and reach new highs next year, Covid-19 will have further widened the financial gulf between the haves and the have-nots, writes Hamish McRae

Wall Street has recovered much of the losses from the crash in March (Reuters)

What is it with share prices? We have a global economy savaged by the sharpest recession for almost 100 years. There is the possibility, if you believe the pessimists, that Covid-19 will return for a second, far worse spike in the winter. Governments have borrowed shedloads of money that will, one way or another, have to be paid back. And the world’s two largest economies, the US and China, are in a trade war with each other.

Yet equities on both sides of the Atlantic have bounded back up: the Nasdaq Composite index hit an all-time high during trading on Friday; the broader-based S&P500 has recovered about three-quarters of its loss this year; the DAX, the index of the top 30 German companies, has done pretty much the same; and while the FTSE100 has been a bit of a laggard, it is back two-thirds of the way from its peak.

Rarely has there been such a disconnect between economic commentators, most of whom are profoundly gloomy, and what the markets are doing.