US President Trump praised on Twitter on May 26:
"The stock market has risen sharply, the Dow Jones Index has exceeded 25,000 points, and the S&P 500 index has exceeded 3,000 points. All states should open up as soon as possible. The transition to greatness has begun, and it will be earlier than the plan, and there will be ups and downs, but next year will be the best year ever!"
Yes, the most exciting thing is Trump.
On May 26, the Dow Jones Index and the S&P 500 tested the important integer mark. The Dow Jones Index once stood at 25,000 points, and the S&P once rose to 3,000 points and broke through the 200-day moving average. Looking back, major U.S. stock indexes have risen by more than 30% since the end of March.
The US stock market took a roller coaster, the Dow Jones Industrial Average went from its highest point of 29,568 points to the lowest point of 18,213 points after the global outbreak caused the capital market to plummet, and then returned to the 25,000 points post, which was only one step away from the high point. The other S&P 500 and Nasdaq indexes were roughly the same.
In sharp contrast, in the past nine weeks, the number of first-time unemployment benefits in the United States has accumulated 38.9 million, and the employment growth in the United States over the past 10 years has long been completely erased.
The U.S. Federal Reserve warns that the U.S. unemployment rate may peak 20% to 25% in May or June, while U.S. manufacturing is shrinking at its fastest pace since the 2008 recession, with consumer spending falling sharply, and many household-known retail companies filed for bankruptcy.
Why is the US stock market rebounding even though the economy is obviously poor, and it is even about to return to its pre-epidemic position?
This needs to be analyzed from five aspects.
First of all, the first driving factor is the over-issuance of currency, and a large amount of funds poured into the stock market, causing the stock market to diverge from the fundamentals.
US stocks suddenly "avalanche" after hitting their peak in late February. In March, US stocks fell into a bear market at the fastest speed ever. The global economic shutdown drove investors to sell panic, but since then, the Federal Reserve has quickly injected cash, and the US government has allocated more than $3 trillion to bailout funds.
This trick can be said to be successful every time - the US subprime mortgage crisis in 2008 triggered a global economic crisis, and adopted a "big water release" policy, and the US stock market has experienced an 11-year bull market since 2009.
The Fed's "bottomless" rescue policy in the early stage directly lowered interest rates to zero with unprecedented success and began an unlimited QE model. Of course, the space has been gradually compressed, and the subsequent policy space will be reduced.
Secondly, the market "leaders" maintain growth.
The large blue-chip technology stocks with larger weight contributed most of the rebound. Facebook, Apple, Amazon, Microsoft, Google, which are regarded as core assets of the US stock market, generally rose by more than 10% this year.
These five major technology stocks account for about 20% of the S&P 500 index components, and they are all beneficiaries of the spread of the epidemic and the "lockdown" of the United States.
In the secondary market, the biggest decline in US stocks came from energy stocks, with a drop of 35% this year, but the weight only accounts for about 3%, so the overall drag on the index is limited.
Third, the secondary market speculation expectations.
Although the current economic data is bleak, many investors are willing to bet on a V-shaped recovery, believing that "the negative news has been fulfilled" or "the worst time has come." According to the data from
, the number of new crown cases in the United States has decreased, and news about the progress of vaccine research and development has excited the stock market. The states have successively unblocked, economic restart plans, and enterprises have resumed work. People are betting... This is already the bottom.
4th, the policy support of the Federal Reserve.
Although Powell and other senior Fed officials said they think it is unlikely that a V-shaped recovery—that is, the government’s initial relief measures may not be enough to sustain the economy, especially given the unprecedented shock and the current interest rates have dropped to zero.
But the Fed has done a lot during this wave of epidemic and has taken various actions to protect the US economy, such as: providing $2.3 trillion in new loans; unlimited purchase of Treasury bonds, government guarantees and commercial mortgages to support securities; providing short-term loans to "main traders" financial institutions in exchange for collateral, including investment-grade debt; supporting mutual funds in money markets; directly lending to banks, households, consumers, small companies and companies by purchasing investment-grade corporate bonds and commercial paper; reducing the requirements for banks to absorb losses...
The Fed has made it clear that it will find ways to boost the US economy, and the recent rebound in the US stock market is supported by the Federal Reserve's policy to a certain extent.
In addition, some investors also have a mentality of worrying about missing out on opportunities.
After all, the Trump administration has introduced a series of market rescue measures, which have effectively stimulated investors' confidence.
In recent years, investors have obviously no other good choice. The yield on the US 10-year Treasury bond closed at 0.679% on the 8th. The returns of high-rated companies are also very low. Some investors have even begun to bet on the US to implement negative interest rates.
What they see is the bull market of the US stock market for 11 years, so this round of "hit" by the epidemic has made many investors not want to miss it.
Of course, Bank of America Fund manager survey in May showed that more than two-thirds of professional investors questioned whether the stock market’s rebound since the end of March meant the starting point of a bull market, with about 68% of survey respondents calling the move a “bear market rebound.”
The term implies that even if U.S. stocks rise by more than 20%, it does not mean the end of a bear market. Bank of America 's poll is one of the most widely watched investor surveys on Wall Street, and the pessimistic expectations of institutional investors are also consistent with weak fundamentals.
