Five factors behind the US stock market's miraculous turnaround

Nothing like the recovery in the US stock market has ever been seen before. After the Wall Street Crash of 1929, the time it took for shares to regain their previous peak was measured in decades. After the global financial crisis of 2008, it was measured in years. This time it has taken less than five months – from a low on 23 March – for the S&P 500 to regain all its lost ground and hit a new high. At the time, not even the most bullish trader would have been bet on such a rapid recovery, but five factors explain the remarkable turnaround. Even while the market was crashing in early March, America’s central bank was acting to reassure investors that it would go to any lengths to support the world’s biggest economy and prevent a financial crisis. As in the aftermath of the collapse of Lehman Brothers in 2008, the Fed moved swiftly: it cut interest rates to zero; it promised to pump $5 trillion into the troubled money markets; it created lending programmes to help the cash flow of US businesses big and small; it bought corporate bonds; and it has given the impression that it may buy stocks as well. Mark Haefele, chief investment officer at UBS Global, says the rally on Wall Street and the recent fall in the US dollar are “being driven primarily by central bank policies of adding unprecedented liquidity to markets through renewed quantitative easing and ultra-low rates.”The lockdown has been disastrous for some sectors, notably hospitality and airlines, but people stuck at home have been spending more time online, shopping, watching, socialising and working. That has been good news for the five big US tech giants – Apple, Amazon, Facebook, Google and Netflix. Dhaval Joshi, analyst at BCA research, says the S&P 500 should be renamed the S&P 5 because it is now so dominated by a handful of companies.


All data is taken from the source: https://www.theguardian.com/
Article Link: https://www.theguardian.com/business/2020/aug/22/five-factors-behind-the-us-stock-markets-miraculous-turnaround

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