The government said on Wednesday that the U.S. economy had suffered its worst contraction since the last recession. The head of the Federal Reserve later said he didn't know how bad this downturn would be, or how long it would last.Yet by the end of the day, the S&P 500 stock index had risen 2.7%
The government said on Wednesday that the U.S. economy had suffered its worst contraction since the last recession. The head of the Federal Reserve later said he didn’t know how bad this downturn would be, or how long it would last.That’s been the pattern lately. The drumbeat of grim news — 1 million known coronavirus cases in the United States, businesses are collapsing, the unemployment rate could reach 16% — has done little to deter stocks’ upward march.
“What the market is rallying on is the expectation that whatever the world looks like nine or 12 months down the road, it’s going to look better than it does now,” said Scott Clemons, chief investment strategist for private banking at Brown Brothers Harriman. So when fresh economic reports emerge, such as Wednesday’s announcement from the Commerce Department that first-quarter gross domestic product fell at a 4.8% annual rate, they provide little new information to investors.
“Stimulus has been the engine that has stabilized and driven asset prices higher,” said Julian Emanuel, chief equity and derivatives strategist at the brokerage firm BTIG.
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