Market cycles are often out of sync with economic cycles. Investors collectively try to discern what is coming, not just what is known today. Therefore, the stock market is forward looking. Economists realized long ago that markets are among the best forecasting mechanisms. In fact, stock market performance is one of the major factors included in the Leading Economic Index published by the federal government.
Obviously, equity investors foresee a more rapid recovery from the Covid-19 shutdown than many have feared. In fact, they are now picking through companies evaluating those that will perform well in the new post coronavirus world from those that may not. Markets can be wrong in their collective predictions, but they do have a good track record.
Another important factor in recent stock market performance is simply how much money there is in the system. Not only has our federal government flooded our economy with a few trillion dollars, other central banks have done much the same. Some of this new money will look for profitable use and get invested in our market. In addition, the U.S. is an investment haven for the rest of the world and attracts international money flows. The consequence may be that good investments become very expensive and stay that way. This may be the inflation many are worried about; not bad however, if you own these assets. Stay steady, my friends.
The Lonely Bull