The Stock Market’s Improbable Recovery Explained

Judging solely by the stock market, no one would know that the economy is suffering its worst downturn since the Great Depression because of the coronavirus pandemic. After plunging 34% over almost five weeks in February and March, the S&P 500 Index has steadily rebounded and closed at a record on Tuesday, capping an improbable rebound in which the benchmark rallied 52%.

The reasons for the comeback are no mystery. Swift actions by the Federal Reserve and the government to pump trillions of dollars into the financial system and put money directly into the hands of those consumers who needed it most garner the bulk of the credit. There’s also optimism that one or more vaccines may soon be widely available. To be sure, the rally has been relatively narrow, led mainly by technology and health-care companies. Only about a third of S&P 500 companies are above their mid-February levels, and the average stock in the index is still down about 6%, according to Bloomberg News.