If the market’s ‘free pass’ is over, news must be more than just ‘less bad’ for rally to resume
Has Wall Street’s free pass expired?
That’s one way to interpret last week’s sharp setback in stocks, which punctuated a powerful rally built during a period when expectations for the economy were minimal and the pessimistic arguments on a Covid second wave, fiscal-policy shortfalls and electoral politics could not soon be proven.
This free pass allowed investors to rebuild equity exposure rapidly from depressed levels without needing much more than “less bad” news and revived credit markets.
Last week, though, the Federal Reserve’s cautious longer-term outlook on the economy and a steady rise in Covid cases in several hot-weather “reopened” states served as plausible excuses for Thursday’s near-6% selloff in the S&P 500 and jump in the CBOE Volatility Index.
While the threshold for re-imposing stay-at-home orders appears quite high in most of the country and is not favored in public-opinion polls, the climb in coronavirus hospitalizations has …continued .
[Source: CNBC News]