While it is still about 15 per cent off the peak it reached in February, since bottoming out on March 23 the US market has rebounded more than 28 per cent. That gain of more than 20 per cent says, technically, it is once again in a bull market phase. Trump’s ebullience, and that of the stock market, is at odds with the mood of the 26 million Americans who have become unemployed in the past month and is almost certain to jar with the US GDP data due to be released on Wednesday. Loading Despite the fact that the US only began shutting down its economy (belatedly) in late March, the March quarter GDP data is expected to show the largest contraction since the nadir of the global financial crisis in the first quarter of 2009. Economists are estimating a fall of about 7.5 per cent. The June quarter, where the fall effect of the shutdown will be evident, will be far worse. While some states are tentatively (and some less tentatively) moving to reopen their economies, the likelihood of a sharp snap-back in national economic activity in the September quarter is fanciful, or the desperate fantasy of a president fixated on his re-election prospects as the November election looms.

Trump cited the strength of the stock market to support his optimism. Its strength is not quite as it seems. Goldman Sachs’ analysis last week pointed to the performance of a handful of cashed-up large-cap technology stocks to explain the strength of the rally. The “FAANG+” index of large-cap tech stocks – Facebook, Apple, Amazon, Netflix, Google and others – is up more than 36 per cent from its March lows, dragging the entire S&P 500 index up and obscuring the reality that most of the companies in the index are still trading closer to 30 per cent off their February highs. Loading Replay Replay video Play video Play video Most of the non-tech stocks are exposed to the economic shutdown. With the US quarterly earnings reporting season getting underway last week, the extent of the initial damage will become clearer over the next couple of weeks. What is already apparent, however, is that US corporate executives are far less certain about the outlook than Trump, with a string of industrial companies withdrawing their earnings guidance. That makes the "E" in price-earnings ratios a stab in the dark. The forward PE ratio for the S&P 500 is ostensibly more than 21 times – its highest level in nearly 20 years – but it might as well be infinity, given the size of the question mark over corporate earnings for the rest of this year. If the executives running the business have no idea of the impact of the shutdown on their companies’ earnings, investors are punting rather than investing. Markets are, at this point, flying blind, with the risks asymmetric. There is more risk that sharemarkets will fall significantly rather than rise significantly, given the great uncertainties around how and when the pandemic will end and the extent of the economic harm it will do before that point is reached.

Any recovery is likely to be halting and uneven when it eventually does occur, hence the massive provisions Australian banks are taking against future losses. They know that many businesses won’t survive the shutdown and that others will limp into a less-than-spectacular recovery. Loading The US Federal Reserve Board’s Open Market Committee meets on Wednesday and could be expected to provide a more sober assessment of economic conditions than Trump. The Fed has thrown everything but the kitchen sink at the economic shutdown, providing open-ended liquidity, purchasing corporate bonds and even buying, indirectly, junk bonds. Its balance sheet has expanded from $US3.76 billion ($5.8 billion) to $US6.6 billion ($10 billion) since its response to the coronavirus started. There is some speculation (or perhaps hope among the stock market bulls) that it will start purchasing equities, but that, despite its support for junk bonds, is probably too controversial and one moral hazard too great for it to contemplate. The Fed has already deployed the big weapons in its armoury, some for the first time in history. The Fed’s statement after the meeting will be pored over by economists and analysts. It is the unprecedented series of actions the US central banks took after its emergency meetings in March that put a floor under financial markets that have become accustomed to the Fed bailing them out and protecting their downside in the post-financial crisis era.

Ultimately, however, it is the path of the pandemic that will determine the course of the US and other economies and the US has, despite Trump’s boasts, lagged most of the developed economies in responding to the coronavirus. Forget about US third-quarter GDP (which will be dismal), for Trump’s bullish prediction of an "incredible" December quarter to be vindicated – and the stock market’s blind optimism to be validated – the US economy will need to be reopened broadly and imminently. The still-rising number of the infected (more than a million) and the death toll (more than 56,500) will have to subside dramatically and there would have to be no new outbreaks, despite a resumption of activity that would need to see the economy bounce back to pre-pandemic levels almost immediately. Now, that would be incredible!

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