Stocks Shrug Off Outbreak Worries and Reach New Record

Such actions — which are typically viewed as supportive of risky assets such as stocks — are commonly referred to as a “put” from central banks, and they have been a key driver in the nearly 11-year-old bull market for stocks.

The Federal Reserve’s three rate cuts and the expansion of the central bank’s balance sheet — a byproduct of efforts to raise the level of bank reserves — were widely seen as a reason for a 28.9 percent rise in the stock market in 2019.

Investors seem to be betting that even if the coronavirus weighs on growth, central banks will prop markets up with further rate cuts and capital injections.

“There seems to be a belief that you have this global central banking put, and it is just stronger than it has been over the past few years,” said Yousef Abbasi, global market strategist at INTL FCStone, a financial services and brokerage firm. “Otherwise, this sharp bounce back we’ve experienced in stocks, essentially to all-time highs, is tough to wrap your head around.”

Some analysts have suggested that the market’s rebound may reflect increased expectations that Mr. Trump — who is likely to be acquitted of impeachment charges in the Senate on Wednesday — will win re-election, after the Democratic caucuses in Iowa on Monday spiraled into an inconclusive debacle.

“Basically Iowa turned out to be a nonevent except for being a black eye for the Democratic Party,” Mr. Sosnick said. “The market generally is positive about that.”

China’s economy has likely stalled in the face of the outbreak, but recent reports have shown — at least before the outbreak — the American economy was relatively healthy.

Article source: https://www.nytimes.com/2020/02/05/business/stock-market-record-coronavirus.html?emc=rss&partner=rss