Well, that snapped back pretty fast. Compared to the two months that preceded it, April was a welcome change for investors. American enterprise recovered quite a bit of the value lost in the preceding 6 weeks, as the S&P 500 rose 12.82% and the Russell 2000 increased by 13.74%. International stocks were also higher, but less so, as the major indices rose mid to high single digit percentages. In fixed income, bond prices rose as yields fells for both the US government and corporate America.
The market continued its strength off the March 23rd, 2020 low, confounding overwhelmingly bearish commentators and scared investors (and perhaps their intermediaries). Many observers point to the unprecedented level of uncertainty in the economy and wonder why the stock market is recovering so fast, while signs of an economic recovery are not yet on the horizon.
This may seem obvious, but the stock market and the real economy are not one and the same. The recovery took much longer in 2008, and this is in part because it took policy makers much longer to act. During the Financial Crisis, very few people knew what needed to be done to address the economy and political will was lacking. This time around, policy makers are more knowledgeable about what to do, have more credible plans, and have been quicker to act on them.
The economic damage has been unprecedented, but so too has the response. While we cannot pin-point the exact time and date of the economic recovery, we feel confident that there will be one. If the market feels confident there will be one, it can begin to price it. If you sit around waiting for all of the questions to have answers and for the economic data to have turned positive, you may well miss the recovery in the market.
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