Stocks surged Tuesday, even as Congress still has not agreed to a $2 trillion fiscal stimulus package that would include the most important ingredient to the economy and market: coronavirus relief.
The market rose by roughly 10%, with the S&P 500 up more than 9% and the Dow Jones Industrial Average up more than 11%.
The market is beginning to recognize that while the Federal Reserve’s extensive and wide-ranging stimulus program can’t spur economic growth until the virus ends, it is saving certain sects of the economy from drowning for the time moment.
Now, bulls are noting that stocks, compared o interest rates and compared to their all-time highs, look like a buy, given historical analysis. Bears note that this crisis is different than previous ones, in that it is a health crisis that is lasting indefinitely, making a recession last indefinitely.
The market fell, at its worst 33% from its all-time high hit in February and is now down 28%.
Tony Dwyer, Chief Market Strategist, Cannacord Genuity
“More evidence of a relief rally. S&P 500 [is] already done to get this oversold. It took a median 37% drop from the SPX peak to signal to get this indicator to a weekly close below 22 [ow for the relative strength index — the lower, the weaker]."
Strategist Team at Unigestion Asset Management ($23B AUM)
"The current financial – and soon to be economic – crisis has gone through a sequence. It started with a macro shock, leading to a financial correction, triggering a flight to liquidity and creating a significant systemic risk. Although the sequence seems similar to previous crises and to the most infamous of them all post-World War II, the GFC, we think there are key differences with 2008 that are worth considering. These differences imply a different medicine for the economy and the falling markets, even more so as the average investor is now rushing to cash. This means a liquidity crisis could follow this economic crisis, making us lean on the defensive side. This shock is exogenous and comes surrounded by uncertainties. It creates a challenging situation that is far more complex than the collapse of the real estate market and/or financial markets in 2008 and 2001. Therefore, finding a solution is also much more of an uncertainty today than in previous crises.”
Frank Lietke, Senior Director, Ally Invest
"During last week when the markets saw the sharpest decline since 2008, Ally Invest not only saw record trading volume, but the number of equity "buys" consistently outpaced "sells", driven by Millennial investors more than any other generation sector. While last week marked the worst week for the markets since 2008, it also sparked a week of extraordinarily high trading volume at Ally Invest, with Millennial investors leading the way in buying in on the dips.”
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