Dec 9, 2020 - Economy

Mercato Partners: Public financial markets have adopted a venture mentality

Dan Primack and Joe Kaiser

Axios' Dan Primack (left) and Joe Kaiser, Mercato Partners. Photo: Axios

Public markets have adopted a venture capital mentality during the coronavirus pandemic, Mercato Partners' director Joe Kaiser said on Wednesday during an Axios virtual event.

The big picture: The divergence between capital markets and the "real economy" — defined by mass unemployment and Americans lining up at food banks — can be seen in highly optimistic fund managers and BlackRock's latest forecast that expects stocks to keep rallying into 2021.

What they're saying: Kaiser believes that public markets are focused on what companies will be worth five years from now, instead of near-term net profit or earnings per share (EPS).

  • "I think that's why we had this peculiar disconnect as people, investors, public market investors see the light at the end of the tunnel from a COVID standpoint and the sort of the restart of the economy."
  • "And that's why we're we're ending up with these valuations that look frothy relative to the bread lines that you mentioned," he added.

The bottom line: There could be consequences if "growth rates can't keep up with market expectations," Kaiser acknowledged.

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