Stocks have staged a remarkable rebound over the past several weeks, despite dismal unemployment readings and declining profit expectations. Investor optimism appears to come in several forms: that job losses will be temporary and return quickly once lockdown restrictions are eased; that a relatively quick breakthrough on the health care front will occur to combat the virus through treatments or vaccines; and that monetary and fiscal stimulus will keep consumers and businesses afloat until the economy recovers. Another few things could be fuelling recent market psychology – a “worst-is-over” mentality that is bringing in substantial money from the sidelines; a “no-place-to-go-but-stocks” approach given record-low 10-year yields; and a “fear-of-missing-out” thinking that has investors worried about lagging performance.
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