Protests are dividing the United States, a bitter dispute is brewing over Hong Kong, a pandemic continues across the world, and the stock market is on the rise.
The Dow Jones Industrial Average soared 527.24 points on Wednesday, or more than 2 percent, to close at 26,269.89, as Wall Street continued to ignore spectacular images of looting and police clashes as racial tensions explode across the country. It was the third consecutive day of earnings for the blue-chip index this week, dropping it more than 900 points above the close on Friday.
The Dow has now risen more than 40 percent from the lows it reached in late March, when the coronavirus panic raised fears that the US economy. USA It is headed for its worst crisis since the Great Depression. It is now only 12 percent below the all-time high of 29,951.42 that it reached on February 12.
Undoubtedly, Wednesday’s stock gains were fueled in part by reports that social unrest seemed to be easing as charges against Minneapolis police officers increased for the murder of George Floyd.
Additionally, a report on Wednesday showed that private payrolls posted a narrower-than-expected drop last month.
Ryan Detrick, senior market strategist at LPL Financial, notes that the stock market is seen as a forward looking metric, meaning it has already started trading on the alleged economic rebound in the pandemic as things continue to reopen.
“This is a harsh reminder that actions are cold-blooded,” Detrick told The Post.
However, multiple sources within hedge funds and investment banks tell The Post that sentiment within their companies remains skeptical as economic data, news headlines, and even noise outside their windows point to to a giant disaster whose cleanliness will be measured in years, not months.
“I woke up at 2 in the morning [Monday] night because there were sirens and screaming, “a hedge fund manager living in Manhattan told The Post.” I could see a car or a trash can burning from my window … Out of habit, I checked the futures market and everything I was ready. It was a juxtaposition.
With more than 40 million Americans unemployed, default rates on all types of loans are skyrocketing, and GDP is now projected to drop by nearly $ 8 trillion over the next decade, some traders wondering aloud if civil unrest Prolonged should not be a major market concern.
“Much of this optimism is based on the assumption that we are reopening the economy,” said one macro operator. “But I’m having a hard time keeping a positive attitude about that as I see curfews and broken windows in New York, Los Angeles and Chicago.”
It is the Federal Reserve, investors agree, that has created the surreal rebound in stocks. The central bank has injected trillions into the crisis economy in recent months, an unprecedented amount of stimulus that has kept markets happy, even as the crater economy.
“The market has been on its own journey for a while,” said an investment banker. “It has been the worst year of my life in terms of news, but the Fed has made it so easy to ignore all the human carnage.”
The success of the Fed and Congress’ unprecedented stimulus packages have led to what some say is a false sense of calm.
“I think the Fed has once again created a bubble that has increased future risks to the markets,” Thomas Thornton of the Hedge Fund Telemetry wrote in a note Tuesday.
“We ignore what is happening now at our own risk on many levels,” said the macro operator.
“Putting aside what this means for the country, tear gas outside the White House during a literal pandemic is not an optimistic sign for me.”
However, this week’s stock market gains show that investors are once again gambling, betting that the coronavirus is in retreat, civil unrest is a short-term problem, and that the Fed will step in again if they are wrong. . .
“The market implies you are not afraid,” said Detrick. “The market is ready to look further.”