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Friday, March 12, 2021
Stocks continue to lead the way out of the pandemic.
On Thursday, the world marked the one-year anniversary of the WHO declaring COVID-19 a global pandemic.
Some will remember March 11, 2020 as the day the NBA paused its season, beginning a cascade of postponed or canceled sporting events that would last months.
Others will remember Tom Hanks and Rita Wilson's positive COVID tests in Australia, news that made one of Hollywood's biggest stars the face of a previously amorphous threat.
The Dow also entered a bear market back on March 11, 2020, cementing what financial markets had been signaling for weeks — that the COVID-19 pandemic would deeply disrupt the world's economy.
Just a week later, however, we wrote at the Morning Brief that the market's decline had already priced in a full recession. A few days after that, on March 23, 2020, the market bottomed and began a rally that continues still.
It's fitting, then, that both the Dow and the S&P 500 closed at record highs on Tuesday.
Because over the last year, questions about a seeming "disconnect" between stocks and the economy, about valuations, about speculative activity in markets, and about fiscal support, among other concerns, have lingered in the background of this rally.
Take, for instance, Thursday morning's employment data which showed another 712,000 Americans filed for unemployment insurance last week while some 20 million Americans were still receiving some sort of unemployment benefit as of last month. These are shocking numbers to see on a day stocks close at a record high.
But as it has for the better part of a year now, the market's message remains clear — investors believe better days are ahead for this cycle.
President Joe Biden on Thursday signed into law a new $1.9 trillion stimulus package which sends many Americans a third direct payment in the last 12 months. Combine unemployment and child tax credits with $1,400 stimulus checks and Biden's plan offers five figures worth of either payments or tax relief to millions of families.
For months now, investors have been betting that this stimulus package would be passed with the impacts making their way into the economy. Biden's signing, then, serves then to codify what investors have been anticipating.
But it also acts to remind both investors and the public of why this market rally has been and remains so persistent.
In the face of an unprecedented threat, central bankers, lawmakers, and two presidents have stepped up to act forcefully in support of this economic recovery.
On March 11, 2020, there were roughly 1,200 confirmed cases of COVID-19 in the U.S.
On March 11, 2021, about that many Americans were vaccinated against COVID-19 every minute.
And with a turnaround like that, it's little wonder markets held their nerve over the last year.
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