The economy and stock market will become increasingly disconnected from each other in 2021, as companies are likely to reduce headcount to increase profits, manager Kevin Nicholson toldThe co-chief investment officer of global fixed income at RiverFront Investment Group said firms are going to focus more on profitability next year, and this is "going to create a divergence between the economy and the market.
Nicholson, who manages $7 billion of assets according to CNBC, said this divergence will hinder the US economic recovery from the pandemic due to the adverse impact it is expected to have on consumption. "You can increase profits in two ways. You can either increase your sales and revenue or you can cut costs," he said. "I believe that companies are going to do the latter and the biggest expense they are going to have is their employees. A lot of these workers that were furloughed will not end up coming back to work and they are going to be permanently unemployed.
More than 13.5 million Americans are still out of work compared to a pandemic high of about 23 million. Data from Yelp this week showed 60% of US businesses that have shut since the start of the coronavirus pandemic won't ever reopen.
Seems to me that they already are very much disconnected. Game theory is what has been the most reliable to me so far this year. Classic investors' dynamic is a pre-covid thing
I think it should say 'even more disconnected'
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