Why is the S&P 500 rallying in a crisis?

Question

I'm trying to process a disconnect between the unemployment crisis brought on by the virus, an incoming housing market implosion and a decreasing Index of Consumer Sentiment with the fact that the S&P 500 is up 500 points in the past month - it's on track for the best month since 1974.I don't understand monetary policy or macro-economics in general, but I'm struggling to grasp the gap between my intuition and reality.What's the deal?

MichaelKovacs · Accepted Answer

Here is a great twitter thread from Gavin Baker at Atreides Management that may help with how to think about it...but don't expect a straight answer, because there is no straight answer
https://twitter.com/GavinSBaker/status/1255215997730066435
"...the irresistible force of the largest stimulus ever vs. the immovable object of the sharpest economic slowdown in history..."

auganov · Answer

So far we've made back about half of the crash. The bottom was when Corona growth could still be considered exponential. All the bad economic data was already anticipated at this point.Over the last few weeks it has become apparent Corona doesn't have much room to accelerate. The worst possible scenario is fairly well understood now and it's not all that bad. I assume most of the "rally" is taking horror scenarios off the table. Hence it's more of a reverse correction.

andymoe · Answer

S&P 500 is a Capitalization-Weighted Index meaning the larger companies make up much more of a percentage of the index. And in this environment companies that are large with lots of cash are in a super good position and people are fleeing to them for safety. So their prices rise (a lot in some cases... see Amazon) and so the S&P 500 goes back up a lot. It is worth noting it&rsquo;s still down like 400 points for the year though.

patatino · Answer

The FED said there is an infinite amount of money and like they say in investing, never fight the FED.I think a lot of people assume the jobs are not really lost and will be back after the virus. I guess we have to wait and will see how many of those jobs are really lost.

s1t5 · Answer

In addition to all other arguments - it's up 500 points in the last month after dropping over twice as much the month before. The virus is still a net negative for the market.