Markets May Have Found What They're Looking For

The global stock market rallied on Monday for the fourth time in five days. The MSCI All-Country World Index is up 15.9% since March 23, led higher by gains in the U.S. Does this mean the carnage is over? Nobody can say for sure, and for every Wall Street firm saying yes, there’s another warning that the worst is yet to come. Yet, there was a lot to like about how markets gained at the start of the week.

What was most encouraging about the latest action is that it came despite a slew of news that, one would think, would be negative for riskier assets. Yes, the news out of Abbott Laboratories that it has developed a coronavirus test that can tell if someone is infected in as little as five minutes did a lot to boost sentiment. But that’s where the optimism mostly ends. Over the weekend, top infectious disease expert Anthony Fauci said U.S. coronavirus deaths alone could reach 200,000, prompting President Donald Trump to extend nationwide social-distancing recommendations until April 30. The deadly and widespread nature of the pandemic was hammered home with the news that a longtime senior Wall Street executive died of virus complications. Risk sentiment not only overcame that news, but also more fundamental issues such as a broad gain in the dollar and another big decline in oil prices, this time to an 18-year low. A rising dollar and plunging oil prices had contributed almost as much to the equity market sell-off in the early days of the coronavirus pandemic as the expanding virus itself. The point here is that the market rallied in the face of negative news, which many suggested would be a prerequisite for stocks to regain their footing.