Why Markets Have Rallied

I have been asked over and over why the stock market has rallied in the face of pretty grim news.  Here's my quick reasons why:

Markets will rally off their lows usually when the economic news is at its worst.  That's why we've seen the massive move higher off the bottoms from late March on.  

Investors are looking through 2020 earnings and maybe even the first half of 2021 at this point.  What they will want to seeing the coming months is the economic data becoming less worse.

Don't fight the Fed.  The Federal Reserve is injecting massive amounts of liquidity into the system.  Investors believe the Fed has their back.

Historically low interest rates make stocks look more attractive.

The major market indices make the current stock market situation perhaps look better than it is.  That's because larger, market cap weighted companies make up the lions share how these are constituted.  When you look at broader based and equally weighted indices and ETFs, you'll find these still on average 12-18% lower for the year.  These broader based indices capture parts of the market beyond technology and health care which have been the big winners in 2020.  They also paint a truer picture of the damage inflicted on the economy.

Back Friday.