Typically, there is some loose correlation between the action in the stock market and economic expectations. When consumers and businesses are confident about economic growth, that usually means that stocks will act in a positive manner.
This relationship does not seem to currently exist right now, primarily due to the massive stimulus created by the Fed. The market has turned a blind eye to the economic challenges that lie ahead as the focus is on the $8.5 trillion in liquidity that the Fed is creating.
Even a negative reaction to earnings from JPMorgan (JPM) and Wells Fargo (WFC) and weakness in oil had no impact on the overall market. Cash poured into the Nasdaq 100 (QQQ) leaders with Amazon (AMZN) hitting a new all-time high with other names like Apple (AAPL) and Microsoft (MSFT) jumping like they are completely immune to the biggest economic slowdown since the Great Depression.
The way the market is acting right now seems to indicate that there will be no real economic fallout from the coronavirus crisis. We know that can't possibly be true, but the worries and concerns are rendered meaningless, because the Fed has said it will do whatever it takes to offset the economic loss. Whether it can actually do that effectively is not clear, but everyone knows you can't fight the Fed.
Wednesday we will have additional earnings from the likes of Bank of America (BAC) , Citigroup (C) and Goldman Sachs (GS) . It will be instructive to see if they can react better than JPM and WFC, but they are likely to repeat some of the same comments about a recovery taking quite a while.
It is a very tough market for those that are trying to navigate the action. Do you trust the Federal Reserve to keep driving this market higher, or do you remove some risk in view of the poor economy that lies ahead? Has this market accurately priced in the cost of the coronavirus?
It is often said that the market tends to do what will confuse the most people possible. It is doing quite a good job of that.
Have a good evening. I'll see you tomorrow.
(JPM, AMZN, AAPL, MFST, C, and GS are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells those stecks? Learn more now.)
