Strong rally extending into a second day. After rallying more than 7% to open the week Monday, the S&P 500 Index opened strongly again Tuesday on expectations that the COVID-19 pandemic is increasingly coming under control. Global stocks climbed overnight but trailed US gains. Uncertainty remains on how long social-distancing and quarantine measures will need to stay in place, and any good news is welcome after continued downward revisions to economic growth and earnings expectations.
Small business optimism falls. The National Federation of Independent Business (NFIB) Small Business Optimism Index fell the most in its history from elevated levels in March. Many small businesses are facing heavy challenges from mandated shutdowns, a slowing economy, and more difficult access to credit. Access to loans through the CARES federal stimulus program will provide some added support, but it has yet to come on line fully.
The end of the expansion. We are likely in a recession, which means the more than 10-year record economic expansion is over, although this recession is unlike any we’ve ever seen before. Remember, the average recession has lasted 11 months, with the shortest ever lasting only 6 months. Stocks have tended to bottom and rally well before the recession is over, as they sniff out upcoming growth. We discuss these important themes today on the LPL Research blog.
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