It might be premature to declare the bear market dead, but Thursday’s action sure checked off some important boxes.
Conventional Wall Street wisdom is that bear markets, or 20% declines from 52-week highs, die on bad news, and Thursday featured some of the worst the U.S. economy has ever seen.
Nearly 3.3 million Americans filed initial jobless claims for the week ended March 21, marking the worst week ever, by far. The second-worst number came during the 1982 recession, and the report released Thursday more than quadrupled that total.
Yet the market rose, violently so, at one point hitting 20% off the recent lows, which would define a bull market. That came just days after the longest bull market in history took the quickest fall into bear territory ever.
According to cnbc.com, the thinking about bear markets dying on bad news is that the market is always looking ahead.
Even if current conditions look bleak, the selling will stop. The fully prices in all of the awful stuff out there.
On Thursday, there wasn’t much sense about the move. But, it did spark talk that the worst of the market damage from the coronavirus crisis could be over.
Randy Frederick, vice president of trading and derivatives at Charles Schwab, told about the problem.
“The markets and the economy don’t run in parallel. The market’s running way ahead of the economy.”
In addition, he said “The markets don’t care about what’s happening today, the market cares about what’s happening six months from now.”
If that’s true, then it makes some sense that the market, as measured by the Dow Jones Industrial Average, is rallying after falling some 37% from its historic peak set in February.