Currencies (USD rallying as the world’s currency), bonds (going down) and commodities (crashing), all get the message.
It’s just equity that’s standing out because the Fed is creating Quantiative Easing Infinity. And it’s only US equities, every other index hasn’t shown the craze bear rally.
The problem is, it inflated an already artificially inflated asset bubble, with fundamentals (P/E, Buffett indicators, etc) completely out of kilter.
People pin their hopes on a speedy recovery once markets open. That hasn’t happened in China, in fact, second waves of COVID19 are already spring up in some areas of China and Singapore.
30m unemployed in The USA, at least 2/3 of them are continuing claimants so have no job to go back to. Some economists see 34% unemployment as likely. CPI at historical lows. Various big companies like Hertz already going bankrupt. Q1 earnings was 17% down if I remember correctly, and that was only two weeks of lockdown - Q2 will be dire. GDP likely to contract by 40% annualised rate in Q2.
Those are numbers you can’t just shake off. The Fed thinks they can solve insolvency with liquidity, you can’t. You don’t solve a demand problem with supply.
Also, let’s not forget that the global economy, and the USA in particular, had already slowed down before COVID19. The virus wasn’t the reason for the crash, it just exposed and accelerated underlying economic weaknesses.
There is a reason the S&P500 has been going sideways now. The market is nervous and unless the Fed starts buying stocks, like they did in Japan, they are running out of ammo. And buying stocks or negative interest rates didn’t work for Japan - it creates a lost generation, and they can’t find a way out.
S&P 500 and Nasdaq are entirely dependent on 5 stocks not selling off and to keep adding to their multiple expansion program.
The way I see it is this: buy the re-opening rumor, sell the factual horror: rally-inducing news of stimulus & vaccine efforts will likely give way in coming weeks to disappointing realities of prolonged distancing, supply frictions, and confused calls for budget austerity.