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The market rallied sharply last week helping the major indices hit fresh record highs as the bulls continue to shrug off any negative headline. The “big” headline last week, that would normally spook investors, was that the coronavirus continued to spread, and Beijing set a 14-day quarantine rule for new arrivals to help stop it from spreading further. The 15th case was announced in the U.S. and many more cases spread around the globe. Instead of falling, the stock market rallied because the only news that matters (for now) is that Jay Powell said the Fed will buy assets if the market gets in trouble. Reading between the lines that clearly means that easy money is here to stay and, again, for now, that’s all that matters. 

Monday-Wednesday’s Action:

Stocks rallied on Monday after China injected $170 billion into the system to stimulate markets as the coronavirus continued to spread. On Tuesday, Jay Powell said he’s monitoring the coronavirus and its impact on the economy in order to determine the best course of action. On Wednesday, stocks rallied nicely after Jay Powell said the Fed will “aggressively” buy assets during the next downturn. In plain English, that means the Fed will do everything in its power to avoid another downturn. After Wednesday’s close, China reported many more cases of coronavirus which sent stocks lower overnight.

Thursday & Friday Action:

On Thursday, stocks opened lower but rebounded for most of the day before closing in the red as fear spread regarding the coronavirus. In other news, Tesla raised $2 billion as the stock continues to race higher. Stocks were relatively quiet on Friday as the major indices continued to flirt with fresh record highs. 

Market Outlook: Easy Money Is Back

Once again, global central banks are back on the easy money bandwagon after the Fed and the ECB both announced more easy money measures directly aimed at stimulating global markets. The market has soared all year based on two key points: optimism that a trade deal will be reached between the U.S. and China and more easy money from global central banks. In 2019, the Federal Reserve reversed its stance and moved back into the easy money camp. Then, other central banks followed suit and that means easy money is back to being front and center for the market. Phase 1 of the trade deal was signed, now let's see what happens with Phase 2. As always, keep your losses small and never argue with the tape.