Stocks opened solidly higher. Markets appeared to like this morning’s combination of the start of earnings season and unfolding plans to reopen the US economy. Markets took big bank results in stride. Asian markets got a boost overnight from better than expected import and export data out of China, helping to shore up confidence in the economic recovery path globally. Texas regulators are meeting to discuss oil output cuts. The International Monetary Fund (IMF) released its World Economic Outlook.
Mixed signals from bond market. Some signals from the bond market mirror recent equity market optimism, but some caution is still reflected in Treasuries. Implied inflation expectations based on Treasury inflation-protected securities (TIPS) have bounced back meaningfully, and high-yield credit spreads have shown significant compression, though they remain wide. We haven’t seen much movement in 10-year Treasury yields, especially given added support from quantitative easing, although it is still early. It may still take some time to get a risk-on signal from bonds, but progress is encouraging.
Could stocks finish 2020 higher? The S&P 500 Index was down more than 30% year to date on March 23. After a nearly 25% bounce in 13 days, could stocks really finish in the green this year? If they did, it would be the largest reversal ever, topping the 2009 reversal. We will discuss this more today on the LPL Research blog.
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