The S&P 500 Index flirted with closing above 3,000 yesterday, even as much of the economic data is some of the worst we’ve ever seen in our lifetimes. We are often asked how this is possible. The reality is the double backstop of historic fiscal and monetary policy combined with optimism over a potential vaccine coming before the end of 2020 has created a surge of market confidence, leading to a massive equity rally.

At the same time, much of the daily data regarding COVID-19 in the US continues to trend lower. “Yes, we have the same worries as everyone else regarding a spike in new cases as social distancing is r

First quarter earnings season offered something for everyone. On the positive side, corporate America produced solid results outside of the COVID-19 pandemic trouble spots, which included retailers, travel-related businesses, and banks. At the same time, 2020 earnings estimates have plunged, and a return to “normal” earnings could be two years or more away. 

Low Bar Proved Tough to Clear

At the beginning of the first quarter corporate earnings reporting season, we noted the earnings bar probably wasn’t set low enough, given the abruptness of the shutdowns in March. And that proved to be true, as S&

The Federal Reserve (Fed) increased its bond exchange-traded funds (ETF) purchases in the week ending May 20 (the most recent data available), adding another $1.5 billion in bond ETFs to its balance sheet, bringing the total holding to $1.8 billion. With Fed purchases accelerating, the average investment-grade corporate bond spread dipped below 2% last week for the first time since March 11. (Credit spreads reflect market participants’ perception of credit risk.) As shown in the LPL Chart of the Day, spreads had been largely flat for about a month following the initial declines off 2020 peaks despite stock market gains, but Fed buying m

Index Performance – Week ending 5/22/2020

Performance as of 1:30 PM ET

S&P 500:  2.96%
Dow Jones Industrial Average:  3.03%
Nasdaq Composite:  3.30%

Equities

US equities delivered solid returns this week. With three hours to go in the week, all three markets were up almost 3% for the week, with the best performer, once again, the technology-heavy Nasdaq. The small cap Russell 2000 Index enjoyed an impressive rally, with the index returning over 9% for the week. The mid-cap S&P 400 Index also had a solid showing, returning almost 9%.

Amid ongoing COVID-19 disruptions, rising une