The stock market, before Wednesday, rallied strongly as the coronavirus curve flattened. Imagine, now, the magnitude of the rally, Nigam Arora writes for MarketWatch, if the coronavirus were vanquished.
President Trump has said that, due to pent-up demand, the economy will eventually “pop back like nobody’s ever seen before.”
Regardless of your political views, it’s worth reviewing that scenario…
In our analysis, there is a reasonable probability that the U.S. stock market may see the biggest rally ever post-coronavirus.
• Stocks compete with bonds. The Federal Reserve is likely to keep interest rates low for a long time. As of this writing, the 10-year Treasury yield is 0.647%. This is equivalent to a price-to-earnings (P/E) ratio of 155 — many multiples of the S&P 500 stock index. As a result, the stock market will see a significant multiple expansion.
• The U.S. economy is about 70% consumer-based. Consumers will have unprecedented pent-up demand for traveling, eating at restaurants, going shopping, going to the movies, etc.
• A mother-of-all short squeezes will take place.
• There will be reconfiguring of supply chains with less globalization. This will unleash unprecedented capital spending.
MacDailyNews Note: Arora offers more reasons why the stock market could boom this year with its biggest rally ever in his full article here.