{"id":172164,"date":"2020-06-15T13:15:08","date_gmt":"2020-06-15T17:15:08","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=172164"},"modified":"2020-06-15T08:55:53","modified_gmt":"2020-06-15T12:55:53","slug":"why-stocks-are-soaring-even-as-coronavirus-cases-surge-at-least-20-million-remain-unemployed-and-the-us-sinks-into-recession","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/06\/why-stocks-are-soaring-even-as-coronavirus-cases-surge-at-least-20-million-remain-unemployed-and-the-us-sinks-into-recession\/","title":{"rendered":"Why stocks are soaring even as coronavirus cases surge, at least 20 million remain unemployed and the US sinks into recession"},"content":{"rendered":"
June 15, 2020<\/div>
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By Jonathan T. Fluharty-Jaidee<\/a>, West Virginia University<\/a><\/em><\/strong><\/p>\n

The number of new COVID-19 cases in the U.S. is still climbing rapidly<\/a>, over 20 million Americans remain unemployed<\/a>, dozens of major companies<\/a> have reportedly filed for bankruptcy, the country is officially in a recession<\/a> and there\u2019s still no vaccine in sight. Yet America\u2019s main stock market index<\/a> has surged as much as 44% since hitting a three-year low on March 23, erasing most of its coronavirus losses.<\/p>\n

What\u2019s going on?<\/p>\n

As an economist who closely follows financial markets<\/a>, I believe the short answer is the Fed.<\/p>\n

On March 22, just before the Standard & Poor\u2019s 500 bottomed out, the U.S. Federal Reserve announced<\/a> it would begin buying an unprecedented array of assets, including corporate bonds, for the first time. The Fed, which later committed to buying<\/a> up to US$2.3 trillion in assets<\/a>, also said it would increase funding to its Exchange Stabilization Fund \u2013 which helps regulate the foreign currencies trade \u2013 and would purchase more U.S. government bonds and mortgage-backed securities.<\/p>\n

The Fed\u2019s decision to begin buying corporate bonds matters to stock investors because it ensures corporations can access credit markets and borrow at very low rates, which ultimately leads to higher profits down the road. Borrowing costs, or yields, on top-rated corporate bonds are about the lowest in at least a century<\/a>.<\/p>

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This had a second positive impact on stock investors by signaling that the Fed\u2019s unprecedented firepower will eventually be able to restore economic stability, mitigating concerns that the economic and health crises would cause a financial crisis. In just the past few weeks, the amount of securities held by the central bank has swelled<\/a> from under $4 trillion to $5.96 trillion as of June 3 because of its massive purchases of various securities.<\/p>\n

So in a nutshell, despite the dire economic situation still sharply felt by so many, particularly consumers, investors have been fueling and experiencing a sudden bull market<\/a>, built on optimism that the Fed has put a bottom under the economy \u2013 just as it did during the Great Recession<\/a> in 2008.<\/p>\n

Will it last? A sharp crash on June 11<\/a>, over concerns of a second wave of coronavirus infections, suggests that day traders should tread carefully. Dr. Anthony Fauci\u2019s \u201cworst nightmare\u201d<\/a> isn\u2019t over yet.<\/p>\n

About the Author:<\/strong><\/em><\/p>\n

Jonathan T. Fluharty-Jaidee<\/a>, Assistant Department Chair and Professor of Finance, West Virginia University<\/a><\/em><\/p>\n

This article is republished from The Conversation<\/a> under a Creative Commons license. Read the original article<\/a>.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Jonathan T. Fluharty-Jaidee, West Virginia University The number of new COVID-19 cases in the U.S. is still climbing rapidly, over 20 million Americans remain unemployed, dozens of major companies have reportedly filed for bankruptcy, the country is officially in a recession and there\u2019s still no vaccine in sight. Yet America\u2019s main stock market index […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-172164","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/172164","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=172164"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/172164\/revisions"}],"predecessor-version":[{"id":172165,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/172164\/revisions\/172165"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=172164"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=172164"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=172164"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}