The market is focused on “Easy Money” from global central banks and everything else is noise. In fact, the biggest single factor for the massive gains we have enjoyed on Wall Street since the 2008 financial crisis are attributed to easy money from global central banks.
The Fed/Central Bank Put:
Investors understand that anytime the market gets in trouble, global central banks will step in and flood the system with liquidity and stocks will recover. It happened every time the market got in trouble since 2008 and there are no signs that things will change. There’s a big debate on Wall Street, some argue for more easy money and some argue against it.
The Case For Easy Money:
This camp believes that more easy money is good for the market (and the economy) because it stabilizes asset prices until the short-term threat passes. Over the last decade, we experienced several short-term threats and they all (eventually) passed.
The Case Against Easy Money:
There are many people who argue against easy money because of the unknown consequences that may occur down the road. Two big fears are: hyper inflation and what will happen when this big “everything” bubble pops? If either of these two scenarios unfold, the fear is that no amount of easy money will be able to “fix” it and we are much worse than if we let normal market forces unfold.
A Few More Reasons Why The Market Doesn’t Care:
The other reasons why (at this point) markets are largely dismissing a second wave is because no one knows if it will happen, how bad it will be, or if a vaccine will be available by the time a second wave happens. Until we see a major sell-off on Wall Street, the market is optimistic that this too shall pass.