First things went downhill, then up again: this is how the completely irrational behavior of investors during the coronavirus crisis can be described. As the virus spread faster and faster in March, many countries shut down their economies to combat it. And what did investors do? They abandoned rational thinking.

Share prices plummeted. Within four weeks, they fell by 30 percent worldwide, in Germany by as much as 40 percent. However, shortly after equity analysts had quantified the extent of the resulting fall in corporate profits, the stock market, to everyone's surprise, staged a brilliant recovery, with the German share index, for example, rising by 52% in less than three months.

All this has only happened because investors have constructed a strong link between the economy and the capital market. This is because the two values actually depend little or not at all on each other. This becomes clear, for example, when looking at the long-term share performance, consisting of price gains and reinvested dividend income, of the markets in old industrialized countries.

In Italy, for example, the real economic output of one person increased eightfold between 1900 and 2020. In Australia, it increased sevenfold in the same period. It would therefore be expected that the Italian stock market would have risen slightly more than the Australian market. In fact, the value of Italian shares has increased eightfold in real terms during this period, while the value of Australian shares has increased 3,174-fold.

Long-term economic forecasts are irrelevant for estimating the long-term earnings expectations of equities

No, that's not a typo and it's not a coincidence either. A whole series of industrialized countries can be compared in this way. Long-term economic forecasts are irrelevant for estimating the long-term earnings expectations of shares or investment funds - and this also applies in the medium term. Even short-term economic forecasts are of no use to investors. Although there is a connection between economic development and the stock market, there is a time lag. Statistics show that the economy lags behind share prices.

The decisive factor for a country's share performance is not high economic growth, large raw material deposits or the number of Nobel Prize winners, but the proportion of well-managed companies that earn a lot of money for their shareholders with sustainable business models without treating employees or suppliers badly. Governments that run the country well are just as important. Corona will not change that.