The index has just reached its best 50-day rally of all time, as investors choose to look beyond the risks associated with mounting tensions between the United States and China and widespread civil unrest in the United States.
What happens: Since March 23, when the index hit its most recent low, the S&P 500 gained 39.6%. That’s the strongest increase in 50 business days, according to Ryan Detrick, senior market strategist at LPL Financial.
“There is an old market that says stocks go up the stairs and down the elevator, but in the last market cycle the rise was almost as fast as the decline,” Bespoke Investment Group analysts told clients.
Detrick noted on Twitter that stocks increased both six and 12 months after the other seven largest 50-day concentrations. But for that to happen again is an extremely difficult call to make given the widespread uncertainty about Covid-19’s trajectory, the lack of guidance on corporate earnings, and the fragile political environment in the US. USA
“The key in our view is that we do not end in a negative spiral that is typical of recessions, between weak final demand, falling earnings, weak labor market, weak credit markets and low oil levels. [prices]”JPMorgan stock strategist Mislav Matejka said in a note to clients this week. He also noted his concern that the US-China relationship could deteriorate again.
China’s civil aviation regulator issued a notice Thursday that effectively allows U.S. carriers to resume limited service in the country. But it is not clear that this is enough for the Trump administration to back down.
The dispute highlights the current risks that the relationship between EE. USA And China could transfer significantly even before the US presidential election. USA Analysts previously thought that a trade truce late last year would continue at least until November.
And for JPMorgan’s Matejka, it’s not the only concern.
“While we were optimistic throughout 2019, and most of the past 10 years, we believe that the current risk reward for stocks is not overly attractive,” he said.
The monetary stimulus wall continues to grow
Governments and central banks continue to dump money in the worst global recession since the Great Depression in hopes of driving a recovery in the second half of this year.
The latest: Germany’s government approved a € 130 billion ($ 146 billion) stimulus package to fuel its recovery, ensuring that Europe’s largest economy will join its short-term aid efforts with significant spending long-term.
“Now that the closure is coming to an end, we must make sure that everyone has the courage to invest again and make sure that consumer demand increases again,” said Finance Minister Olaf Scholz.
Investors have welcomed the move, while warning that policymakers can only do so much.
“The fiscal response to the crisis is approaching the textbook. It is powerful and decisive,” Bank of America Europe economists Evelyn Herrmann and Ruben Segura-Cayuela told clients on Thursday. “But a large export sector still means only a partial cure if the rest of the world does not recover.”
ECB Time: Attention is now directed to the President of the European Central Bank, Christine Lagarde. Investors believe the ECB will significantly expand its coronavirus-era bond buying program, providing more support. The Bank of America team cautions that expectations are extremely high, however, leaving room for disappointment.
World banks enter Hong Kong minefield
Two of the world’s leading banks are backing a controversial national security law that is about to dramatically expand China’s power over Hong Kong.
“We respect and support the laws and regulations that will allow Hong Kong to recover and rebuild the economy and at the same time uphold the principle of ‘One country, two systems,'” HSBC said in a post on Chinese social media.
HSBC is based in London but was founded in Hong Kong and has a significant commercial presence in China. Hong Kong and China are by far the bank’s largest money producers; Last year the divisions raised enough money to eliminate losses in the UK and keep the company profitable.
Meanwhile, UK-based Standard Chartered said in a statement that the proposed national security law “can help maintain the long-term economic and social stability” of the city.
Why it matters: Companies are among a growing list of major Hong Kong businesses that have come out in a show of support for contentious legislation.
Until next time
- Initial and continuous claims of unemployment in EE. USA For the past week at 8:30 a.m. ET
- The European Central Bank announces its last monetary policy decision at 7:45 a.m. ET.
Coming soon: The latest US employment report is expected. USA Show that the US economy cut another 8 million jobs last month.