The missing rhythm

The interplay between financial markets and the economy in “normal” times shows up conventionally on the surface. The economy leads, the market follows; the company forecasts, the investor evaluates; liquidity goes where business opportunity takes it. There is some back and forth, some give and take, the dance isn’t always one-sided, but the rules are more or less straightforward and the music isn’t particularly tough to catch.

In the current period, conversely, the lead of the described ritual has stopped moving and the tune has been arhythmic and distorted in the very quiet background. If there is going to be a dance at all – and as long as there’s a market there really needs to be, because the market always moves, it can’t help it – the roles are suddenly reversed. The markets spin and twirl around their hesitant still partner, and perhaps the motion and the beat become contagious.

Economically, businesses have either been shut down or, if they’re not, they rarely seem to have a sense of rhythm. With or without earnings, regardless of the timing of reports on when or how or if the music stopped, the guidance that is offered for next steps is, at best, devoid of any mood at all.

In response to which, the market dances even harder.


There is a lot of pent-up music in the market. Liquidity runs deep, its interests are sharpened, the audience is most attentive to its every move; in short, conditions are ideal for a role reversal. In these “abnormal” times, the switch and handoff may be esthetically pleasing, but eventually, and before long, the dance partner has to move. Whether it leads again or simply follows is less important than the motion, eventually the other will get bored and tired on its own, and the audience will thin out, grumbling.

Fortune Term Sheet – April 29