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ERROR: type should be string, got "https://www.barrons.com/articles/wall-streets-rally-defies-main-streets-stark-realities-51591376210\nEconomy and Policy\nUp and Down Wall Street\nWall Street’s Rally Defies Main Street’s Stark Realities\nRandall W. Forsyth\nJune 5, 2020 12:56 pm ET\nDemonstrations continue in New York against the police killing of George Floyd on June 02.\nPhotograph by Spencer Platt/Getty Images\n“The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function,” observed F. Scott Fitzgerald. Rarely, if ever, has the mind been tested so severely as in these days.\nComity has never been a prerequisite for rising stock prices, as the past 3½ years have demonstrated. Yet the disconnect between the financial markets and the world around them has grown ever starker in recent months, despite the glimmer of hope unexpectedly provided Friday by a report showing that unemployment had declined in May, although it’s still at a devastating level.\nWith more than 108,000 U.S. deaths from the coronavirus, the deep job losses caused by the economic shutdowns to prevent even more fatalities, and now the eruption of demonstrations across America and abroad after the killing of an unarmed black man by a white policeman, stock prices hover just under their peaks hit earlier this year.\nThe simplest explanation is that the market occupies a world apart from the sickness and strife besetting the nation. To put it in the bluntest terms, stocks are overwhelmingly owned by the wealthiest households, mainly white. They—I should say we—have suffered far less from Covid-19 and have had fewer job losses, especially among those who can work comfortably at home. Neither have we suffered the effects—in this case fatal—of apparent racism, but have benefited from privilege.\nThe numbers tell the story. While over half of U.S. households own equities, the top 1% accounted for 56% of the share ownership at the end of 2019’s third quarter, totaling $21.4 trillion, according to Goldman Sachs’ estimates reported by the Financial Times. The bottom 90% accounted for 12%, or $4.6 trillion.\nThe divergence also falls along racial lines. African-Americans are far less likely than whites to own shares, even when factors such as education are taken into account. About 60% of white households hold stocks, approximately twice the percentage as black households, according to an article in Quartz this past week, based on Federal Reserve data. Among black households headed by a college graduate, 62% owned shares, versus 31% for those with nongraduate heads. In white households led by people without a college degree, 56% possessed stocks, not much lower than black college graduates, while 86% of white college graduate-led households held shares.\nTwo different worlds. According to a survey by the MagnifyMoney.com blog published by LendingTree, more than half of respondents didn’t think the stock market depicted the financial situation of the U.S. consumer. Republicans and those with investment accounts were most likely to think the market did so. But even there, only 35% of either cohort agreed with that idea. Among Democrats, the figure was just 24%, while a mere 13% of those without investment accounts saw a link between average Americans and Wall Street.\nThe Barron's Daily\nA morning briefing on what you need to know in the day ahead, including exclusive commentary from Barron's and MarketWatch writers.\nWhen the stock and corporate credit markets went into near-freefalls in late February and March, the financial and real worlds seemed to be getting in sync as the coronavirus crisis worsened and threatened to exceed the capacity of hospitals in hot spots such as New York City. The S&P 500 index lost one-third of its value between late February and late March. Along with lockdowns and soaring unemployment, that spurred policy makers into action.\nThe Federal Reserve slashed interest rates twice, to near zero, between regular policy meetings. Then it resumed quantitative easing, expanding its securities purchases from Treasuries and agency mortgage-backed securities to corporate bonds and exchange-traded funds. Since mid-March, the central bank’s balance sheet has ballooned to over $7 trillion from just above $4 trillion. The federal government also moved with unusual haste to enact fiscal measures to fill the economic hole left by the shutdowns, including the $3 trillion-plus Cares Act. And another $1 trillion package is reportedly on the way this summer.\nThe effect on financial markets has been electric. The S&P 500 has rebounded 39% from its low and stands just 8% below its old high. The Nasdaq 100 index of megacap tech stocks has led the advance and actually hit a record in Friday trading.\nThe corporate credit market also has been on fire, even though the Fed has bought relatively small amounts of securities. Just the presence of the central-bank backstop brought buyers rushing back into the market, allowing corporations to issue more than $1 trillion of debt this year, providing funds for those in a cash crunch, such as cruise-line operators, and those that weren’t, such as Amazon.com (ticker: AMZN). It issued $10 billion in bonds, including $1 billion of three-year notes at just 0.40%, reportedly the lowest borrowing cost ever for a U.S. dollar issue.\nThis rising tide of liquidity has lifted stocks, despite May’s 13.3% unemployment rate, as reported Friday—actually an improvement on April’s postwar-worst 14.7%, but still far above the 10% jobless rate at the worst of the 2007-09 recession—and the most serious U.S. social unrest since the Vietnam War protests and urban riots of the 1960s.\nBut the Wall Street/Main Street contradictions raise questions about the soundness and durability of Wall Street’s rally. Jeremy Grantham, co-founder of investment manager GMO, writes in his latest quarterly reportthat the stock market’s price/earnings ratio is within the top 10% in history, while the economy is among the worst 10%, perhaps even its worst 1%.\n“Markets have historically loved fat margins, low inflation, stability and, by inference, low levels of uncertainty. This is apparently one of the most impressive mismatches in history. That being said, this is a new type of crisis and much will be different. There are no certainties, but there are probably still some better and safer themes. Caution and patience are likely to be two of them,” he concludes.\nGrantham was early in getting out of the Japanese stock market and exiting tech stocks, two years before those bubbles burst. However, his timing was better before the housing bubble was popped; he got out in 2007. Now, he notes, corporate bankruptcies are just starting as the coronavirus “is causing supply and demand shocks unlike anything before.”\nFitzgerald wanted to hold contradictory thoughts to be “able to see that things are hopeless and yet be determined to make them otherwise.” That is a noble aim as we seek a more just world. In the meantime, investors shouldn’t ignore the contradictions that Grantham points out.\nWrite to Randall W. Forsyth at randall.forsyth@barrons.com\n“The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function,” observed F."