money Wednesday's Market Minute: "Everything" Ain't What It Used To Be
A lot of people look at the persistent strength in stocks and tie their success solely to the Fed. While the monetary policy backdrop is certainly favorable to equities, there's one big glitch in that explanation: none of the other usual participants are taking part. Over the past two years, whenever the Fed came to save the day, investors were blessed with the "everything rally."
This was a prominent feature of 2019, as bonds, stocks, gold, and bitcoin all rallied happily in harmony. That's not happening now. The 10-year yield has been mostly sideways for two months and is up off the lows, gold is stalling out at $1,700 and trading in the risk-off camp lately, and bitcoin is floundering below $10,000. Stocks are increasingly alone in their strength, because stocks are the asset class most tied to the potential for an economic bounce-back, and the odds of that happening have been increasing by the day. The most obvious way that optimism could end is if policymakers who've built a bridge across the corona chasm decide they've run out of bricks, but that doesn't look like a realistic expectation, as we see this morning with Europe's new wave of aid.
Another hit to confidence would be an escalation of the virus case count, but that does not look to be an imminent threat from the earliest data around reopening. U.S./China relations are simmering again, but China/China relations are also fraying, so it is hard to know just how disruptive a force that can be. For now, stocks continue to be not just the only game in town, but the best one for tying an investment to the economy.
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