MONTREAL ― Has the bar for what will rally a stock market fallen far too low?
It used to be that a surge to record prices required some significant good news on the economic front: A run of really good earnings reports from corporations, or employment numbers showing a whole bunch of people just got hired.
But now it seems all we need for a jump to record-breaking stock prices is the news that, in all likelihood, we aren’t all going to die very soon.
Watch: Coronavirus infects Canadians on board quarantined cruise ship. Story continues below.
With a World Health Organization official announcing that the newly-named COVID-19 virus outbreak could be over by April, Toronto’s S&P TSX stock index hit 17,777.11, an all-time high, on Tuesday.
The U.S.’s three core stock market indices ― the Dow Jones, the S&P 500 and the NASDAQ ― all touched record highs Tuesday as well.
This was all neatly captured in a chart from Bank of Montreal senior economist Robert Kavcic, plotting the value of the S&P 500 against new daily reports of COVID-19 cases. As the number of cases peaked and fell, stock prices bottomed and started bouncing back.
Kavcic is agnostic on whether or not this is a coincidence, but “markets have taken some reassurance in recent days that coronavirus containment efforts are working,” he wrote in a client note.
We seem to be living in an age of truly unbridled optimism on the markets. Which is not really good news, because history shows that when markets become irrationally exuberant, they tend to, um, catch a cold.
But from another perspective, the markets may finally have actually gotten it right. After all, what better news can there be that our species will survive? And what could be more worthy of a stock market rally?