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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.

Go deeper

Fed chair says low interest rates aren't driving stock market prices

Jerome Powell. Photo: ANDREW CABALLERO-REYNOLDS / Getty Images

Federal Reserve chairman Jerome Powell told reporters on Wednesday that rock-bottom interest rates aren't playing a role in driving stock prices higher, while noting that vulnerabilities to the financial system are "moderate."

Why it matters: The statement comes amid unshakeable stock prices and a Reddit-fueled market frenzy — prompting widespread fears of a bubble and the role monetary policy has played in that.

Sen. Sheldon Whitehouse under scrutiny for elite club affiliations

Sen. Sheldon Whitehouse during a Senate hearing on Capitol Hill in February. Photo: Susan Walsh-Pool/Getty Image

Sen. Sheldon Whitehouse (D-R.I.) said in a statement Wednesday that he is a member of an exclusive Rhode Island sailing club that lacks diversity.

Why it matters: Whitehouse has repeatedly spoken out against systemic racism and come under scrutiny this week for his family's affiliation with elite clubs. This is the second such club accused of lacking diversity that the senator has been linked to in recent days

3 hours ago - Politics & Policy

Scoop: Border Democrats want migrants vaccinated

Rep. Filemon Vela (D-Tex.) Photo: Chip Somodevilla/Getty Images

Some Democrats representing border districts want President Biden to vaccinate migrants crossing into the U.S. — especially if he lifts public health restrictions that have prevented them from claiming asylum on American soil.

Why it matters: Inoculating migrants treads a fine line of protecting the U.S. population while possibly incentivizing more migration with the offer of free COVID-19 vaccines. Republicans are likely to pounce on that.

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