Winners and losers of 'pandemic economy'

Much economic commentary nowadays focuses on "divergence". While broad equity market indexes are at or near all-time highs, much of the wider economy struggles to recover from one of the most severe downturns ever.

Many have concluded that the market is unmoored from economic reality. But, viewed another way, today's equity markets may be partly reflecting powerful underlying trends amplified by the "pandemic economy". Equity prices and market indexes are measures of value creation for the owners of capital, which is not the same thing as value creation in the economy, more broadly, where labor and tangible and intangible capital all play a role.

Also, markets reflect the expected real returns to capital in the future. When it comes to measuring the present value of labor income, there simply is no comparable forward-looking index. In principal, then, if there is a significant anticipated economic rebound, the outlooks for capital and labor income could be similar, but only capital's expected future would be reflected in the present.