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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.

House passes $768 billion defense spending bill

Photo: Andrew Harrer/Bloomberg via Getty Images

The House approved a $768 billion National Defense Authorization Act (NDAA) for the 2022 fiscal year in a bipartisan 316-113 vote on Thursday.

Why it matters: The annual bill, which authorizes Pentagon spending levels and guides policy for the department, would require women to register for the military draft, among other provisions.

3 hours ago - Politics & Policy

Republicans’ secret lobbying

Illustration: Shoshana Gordon/Axios

The five Senate Republicans who helped negotiate and draft the $1.2 trillion bipartisan infrastructure bill have been privately courting their Republican colleagues to pass the measure in the House.

Why it matters: House GOP leaders are actively urging their members to oppose the bill. The senators are working to undercut that effort as Monday shapes up as a do-or-die moment for the bipartisan bill.

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