And just like that, we’re back to where we started.
The S&P 500, a leading stock market index, on Monday climbed back above where it began the year — before the pandemic brought the United States economy to a juddering halt, before more than 110,000 Americans died from the coronavirus, and before the police killing of George Floyd in Minneapolis set off nationwide protests.
A late-day rally pushed the index into positive territory for 2020, effectively erasing one of the most tumultuous periods in recent American history from the financial record. Stocks rose 1.2 percent — on the same day that economists said the United States fell into a recession in February.
Even though the economy has begun to reopen, it is hard to overstate how disastrous the past three months have been and what the long-term consequences are for everything, from the nature of work to the future of certain industries. Tens of millions of people are unemployed, corporate earnings have plummeted, and industries such as tourism, retail and entertainment might never fully recover from the blow dealt to their businesses.
But in the stock market, it’s like the pandemic never happened.
“Investors seem to have decided that the past three months were just a bad dream that we’re waking up from,” said Scott Clemons, chief investment strategist for private banking at Brown Brothers Harriman, an investment bank.
After an initial few weeks of volatility, when the market dropped 34 percent, it has become inured to the near-daily drumbeat of bad news. When the Commerce Department announced on April 29 that the economy shrank at a nearly 5 percent annual rate, its fastest drop since the 2008 recession, stocks rose 2.7 percent. A month ago, when the Bureau of Labor Statistics published what was essentially the worst employment report on record — showing that more than 20 million jobs disappeared in April as unemployment surged to 14.7 percent, the highest since the Great Depression — stocks rose 1.7 percent.
So, why is the market behaving this way?
In large part, it was the actions of the federal government. Early on, the Federal Reserve stretched its financial safety net wide, announcing it would provide a backstop by using its emergency lending powers to buy assets — from municipal to corporate debt — with newly printed money. Also, it began snapping up government-backed bonds through a newly unlimited buying campaign. That had the effect of keeping bond prices up and yields, which move in the opposite direction of prices, low. And so investors, looking for better returns, began putting their money into the stock market instead, creating upward pressure on prices.
“It’s the only way that you can kind of explain what’s going on, is that people really do believe that there is no downside in equity ownership,” said James Montier, a member of the asset management team at Grantham, Mayo, Van Otterloo & Company, a Boston-based asset management company.
Since March 23, the Dow Jones industrial average has soared 48 percent. The Nasdaq composite index, which is heavily weighted toward technology, is up 45 percent and closed at a record high on Monday, as investors bet that tech behemoths like Amazon and Microsoft were well positioned to benefit from stay-at-home orders around the country. The S&P 500 is also up nearly 45 percent.
“I understand fully the recovery in the market, I just think it’s ahead of schedule,” said Leon Cooperman, the founder of the hedge fund Omega Advisors, which in 2018 announced it would convert to a family office to mainly manage the billionaire’s personal fortune. “It’s ahead of schedule because of the government’s policy of giving out free money.”
Mr. Cooperman was referring to the flood of money — from both the Fed and the government itself — that has been pumped into the economy and markets.
Since the Fed first took steps to stabilize the markets in March, it has created roughly $2.9 trillion, the vast majority of which has gone into financial markets. Separately, the federal government has said it would borrow a record-breaking $3 trillion from April to June, much of which will be channeled to businesses and consumers to keep them afloat during the shutdown.
The biggest winners in the stock market rally have been companies whose very existence earlier appeared imperiled by the crisis, with investors now swooping in to buy the most battered shares in hopes of generating the biggest gains.
As oil prices stabilized since the worst of the sell-off this year, the stock price of the Apache Corporation, an oil driller, quadrupled. Stock in the oil field services giant Halliburton has tripled. (Both still remain down for the year.) The cruise operators Norwegian and Royal Caribbean are both up more than 150 percent. The S&P’s energy sector stocks have risen more than 90 percent, while consumer discretionary stocks and financials are both up roughly 50 percent.
Although it’s well known that market activity is a leading indicator of economic recovery — and investors right now are excited about the reopening of states and the recent May jobs report — skeptics caution that investors may have become overly bullish.
Frequently Asked Questions and Advice
Updated June 5, 2020
How does blood type influence coronavirus?
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
How many people have lost their jobs due to coronavirus in the U.S.?
The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.
Will protests set off a second viral wave of coronavirus?
Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.
How do we start exercising again without hurting ourselves after months of lockdown?
Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.
My state is reopening. Is it safe to go out?
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
What’s the risk of catching coronavirus from a surface?
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
What are the symptoms of coronavirus?
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
How can I protect myself while flying?
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
How do I take my temperature?
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.
Should I wear a mask?
The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.
What should I do if I feel sick?
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
How do I get tested?
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
“Right now the market thinks we’ll have a V-shaped recovery and a vaccine by the end of the year and I think both of those views are too optimistic,” said Byron Wien, a longtime market observer and the vice chairman of the private wealth group at Blackstone.
While Mr. Wien believes the economy is recovering, he thinks it will be a slow return to normal.
Wall Street analysts don’t expect that corporate profits for S&P 500 companies will return to 2019 levels until 2021. But the market rally has effectively already priced in all those gains, in part, some say, because of the government actions. Even after accounting for the government’s support, there are significant risks facing investors that could stop S&P 500 companies from generating the profits they did before the virus reached American shores.
In recent years, large companies have bought back hundreds of billions of dollars’ worth of stock through share repurchase programs. Such programs helped prop up stock prices. But as companies become more cautious, analysts expect them to instead conserve their cash, removing a key support for share prices.
Economic and political tensions between the United States and China — the world’s two largest economies — also remain high, after the two superpowers engaged in a disruptive on-again-off-again trade war over the last two years. A renewed flurry of tariffs could further complicate the recovery for large American corporations as well as the global economy. Such tensions may also be more likely to re-emerge ahead of what could be a contentious presidential election in November.
Then, there is the prospect of a second wave of the pandemic, which could set back the economy once more.
But despite these potential challenges, market investors appear almost wholly unconcerned.
“I think the market is best described as the way people think about second marriages,” said Mr. Wien, 87 years old, who has been watching stocks on Wall Street since 1965. “It’s a triumph of hope over experience.”