Dec 9, 2020 - Economy

Mercato Partners: Public financial markets have adopted a venture mentality

Orion Rummler

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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Mercato Partners: Public financial markets have adopted a venture mentality

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