Legacy markets have almost entirely recovered from their sharp downturn in the middle of March. It appears that the adverse effects of the novel coronavirus COVID-19 are well behind. Despite the doom-and-gloom predictions of many economists, major indices are going up steadily.
The S&P 500 Down Just 10% From Its February Levels
The S&P 500 is currently trading at above 3,000 basis points, charting an increase of about 2% on the day. More interestingly, it’s down only about 11% from its all-time high close price of 3,386 basis points on February 19th, 2020.
Less than a month after its ATH, the S&P crashed to 2,237.40 on March 23rd. This means that in about two months, the index gained almost 35% to reach its current level – an impressive recovery, indeed.
On the other hand, there’s the NASDAQ 100 – another prominent index that also saw its all-time high value reached on February 19th. Back then, it was trading at around 9,718 before crashing to 6,994 on March 20th. Since then, the index has increased by more than 35% to reach its current levels at 9,454 basis points – just 3% less than its ATH value.
Fed-Induced Pump?
As stocks were tumbling in late March, many experts believed that this will lead to a financial catastrophe. The Bank of America slashed its S&P 500 targets for 2020 by 16% and called the situation the “deepest post-war recession” on the record.
Credit Suisse also slashed its yearly targets for the S&P 500 considerably, putting a year-end price of 2,700 – down about 20% from its ATH.
While it’s true that we are early in the year and the adverse effects of the coronavirus on economies might not be fully felt yet, the current recovery does pose some questions. For once, this V-shaped recovery looks a lot like an artificial pump caused by the massive printing of money on behalf of the US Federal Reserve.
Renowned economist Peter Schiff explained why the current recession will be worse than the financial crisis of 2008. He said that the coronavirus was just the pin that popped the bubble and that it was the debt that’s much bigger now compared to 2008 that’s the real problem.
Meanwhile, Bitcoin continues its decoupling narrative as the last few days were fairly negative for the cryptocurrency. Over the past seven days, it lost almost $1,000 of its value as it now trades at around $8,700.
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