Bad news on the economy all we’re likely to see — for now

Bad news on the economy all we’re likely to see — for now

On Tuesday the stock market rallied nicely because people — at least market commentators — perceived that there was good news about the virus.

And they ignored the bad news — lots of it, and not just perceived bad news — about how hard coronavirus had hit the US and world economies.

On Wednesday the switch was flipped.

The stock market got battered as soon as trading started because people — again, at least according to market commentators — decided to ignore any positive medical developments on the virus. Instead, they focused on very ugly corporate earnings that are already being released or are about to be made public.

Oh, and just to make matters even more complicated, this is one of those weeks where stock options and index options expire. So it’s in the best interest of professional traders who dabble in such things to have the market go higher.

So, of those three things — positive news on the virus, negative developments in the economy and traders’ habit of screwing with the market on options expiration weeks — which will be the dominant theme over the next few weeks?

Options manipulation will only be with us for today and tomorrow. Then traders won’t be tempted to pull their tricks again until the week that ends May 15.

So rule that out.

Positive developments in the war against coronavirus will probably keep coming and, hopefully, we will hear more talk about the “curve flattening.” But until some medical laboratory says, “Eureka! We’ve developed a cure,” the stock market isn’t going to fully rejoice.

Curve flattening and opening the economy will be nice developments. But they seem to always be followed by the phrase “but we have more work to do” or “there’s been so much damage to the economy already.”

Pick a huge number for the decline in the US gross domestic product in the first and second quarters of 2020 and nobody will argue with you: a 20 percent decline? 30 percent? 40 percent? A depression? Bad recession?

I think the economy is going to snap back faster than most people think, although it won’t be overnight. Those horrible numbers are the predictions of others, and I can see why they might believe them.

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