Record upside surprises in U.S. economic data are bolstering the case for a “V” shaped recovery from the COVID-19 recession and boosting investor confidence in a stock rally that has already delivered hefty gains in recent months.
FILE PHOTO: Traders work on the floor of the New York Stock Exchange in New York, U.S., March 19, 2020. REUTERS/Lucas Jackson/File Photo
“The safety-net Powell has put in place is not going away any time soon,” said Edward Moya, senior market analyst at OANDA. “While we will see the economy struggle, you won’t likely see a sustained pullback in equities because of all the stimulus that has been thrown at the market.” Still, the ranks of doubters have thinned lately, while bullish sentiment has grown. The percentage of fund managers who believe the bounce is a bear market rally that will eventually reverse fell to just over half in June, from more than two-thirds last month, a survey from BofA Global Research showed.
Investors poured a net $20.4 billion into equity-focused mutual funds in the week ending June 10, the largest one-week inflow since 2007, Lipper data showed.The rally has exacerbated some investor concerns, including those over stock valuations. The S&P 500’s forward price/earnings ratio, a closely followed valuation metric, now stands at 22, a level that was last seen 20 years ago, during the dot-com boom.
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