Powerful monetary and fiscal stimulus programs are keeping stocks aloft, as investors trade into stocks that should benefit from reopenings.
The great rotation continues, with some of the most down-trodden names leading the market higher: industrials, airlines, financial institutions, and energy companies.
Powerful monetary and fiscal stimulus programs are keeping stocks aloft, as investors continue to shift funds to parts of the market they believe will be helped by economic reopenings.
So far, the market has not reacted to the violent protests that erupted all across the U. S. after the death of George Floyd in Minneapolis resulted in charges of third-degree murder against a police officer. Across the U. S., there has been looting on city streets and buildings have been destroyed, yet the stock market has ignored it.
“The market is a forward looking mechanism. They see six months from now, nine months from now there will be more semblance of order. The economy will be coming back, and earnings will be coming back. Estimates have stopped going down,” said Steven DeSanctis, Jefferies equity strategist. “You have the full support of the Fed… the flows into credit markets have been incredible. The capital markets are open. IPOs and secondary offerings are getting done.”
Since credit markets seized up in February, the Fed has created program after program to keep the credit markets moving, including more funding in short-term lending markets, Treasury purchases, a commercial paper facility, a municipal bond program, and a plan to buy corporate bonds. The Fed had already cut rates to zero, and has promised to do whatever else is needed, even as it ballooned its balance sheet to $7.1 trillion.
With the Fed in the market, companies have already issued more than $1 trillion in new debt at twice the pace of last year, and at relatively low rates.
