On 30 June, the S&P 500 ended its best quarter in 20 years as U.S. stock prices continued rising against a backdrop of record unemployment, business closures, and future economic uncertainty.
Analysts attribute the strong performance to hopes for a COVID vaccine, early signs of an economic recovery, and, above all, the U.S. Federal Reserve’s willingness to “do whatever it takes” to make sure the economy does not falter.
The S&P’s rise has been almost as swift as the stock markets’ 35-percent loss of value in a few weeks during March and April.
The virus’s refusal, however, to yield and renewed economic lockdowns in several states has blunted the rally. The S&P added only 1.8 percent in June.
“Massive stimulus by the Fed and on the fiscal side has propelled the stock market’s recovery at a speed unlike what we’ve ever seen,” said Liz Ann Sonders, a Charles Schwab market strategist. “But there’s a… disconnect between what the market has done and the economic recovery. The second half of the year may see a lot of choppiness.”
The tech-heavy NASDAQ is up 12 percent for the year, including a 31-percent sprint during the second quarter.
TRENDPOST: The Dow’s 700-point crash on 27 June followed news of COVID’s record 40,000 new cases the day before. The surge caused officials in several states to re-impose economic lockdowns, spooking investors who feared that an economic recovery was being postponed.
Bank stocks led the way down after the U.S. Federal Reserve imposed caps on distribution of stock dividends to preserve banks’ capital and forbade banks to buy back their own shares in the third quarter.
Oil stocks also softened as crude inventories rose, although the U.S. Energy Administration has warned of a possible supply crunch as early as the end of this year.
Since then, despite more states having re-imposed lockdown rules that have put more businesses out of business and more people out of work, the markets keep moving higher… globally.
Yesterday, the Shanghai Composite Index hit its highest level since 2018 and the Dow surged over 400 points.
Again, there is a perfect disconnect between economic realities and stock market gambling.
