Morning Note: Historic

US equities opened a bit lower but turned green within 30 minutes I suspect on the prospects of positive commentary coming out of Mnuchin’s and Powell’s testimony this morning on the CARES Act. The market’s ultimate reaction today will be influenced by how Mnuchin, in particular, fields what’ll be pointed questions, and to the extent both gentlemen further the we’ll-do-whatever-it-takes narrative.

Bottom line, the market for the time being is trading on headlines and the top-down promise that record levels of stimulus will serve to avert what the history of economics and markets would virtually assure would be one of the worst bear markets on record.

My view is that the likelihood of such a historic outcome will depend on the extent to which the economy, hamstrung by historic levels of corporate debt, responds to this historic stimulus.

While, against historic headwinds, the powers that be may indeed succeed in keeping stock prices buoyant; the question — that we’ve posed herein aplenty of late — is what happens on the other side when they begin to wean the market off of the stimulus. The history of such weaning is, let’s say, unsettling to think about…


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