Bad news doesn’t seem to bother Wall Street these days.
Deaths and hospitalizations related to the coronavirus are soaring, and many businesses have shelved plans to return to the office. Staffing shortages and supply-chain bottlenecks linger, while consumer confidence has fallen.
And yet, the stock market continued its quietly remarkable year in August, posting its seventh straight monthly rise. The S&P 500 index is up over 20 percent for 2021 and has more than doubled in value since it hit bottom in March 2020. The market has closed at a record high 53 times — the most by this point of the year since 1964, according to LPL Financial.
It’s an ascent that looks out of step with the reality of the virus in many parts of the country, but most investors are confident of two things: The Federal Reserve will keep interest rates at rock-bottom levels, possibly for years to come, and the federal government won’t be shy about spending heavily to keep the recovery going.
“I hate to say it,” said Ed Yardeni, a longtime market analyst and president of the stock market research firm Yardeni Research. “But it looks like we’re learning to live with this virus, and the market certainly has.”
Not everybody expects the rally to continue unabated. And any disruption of investors’ expectations about interest rates and governmental supports — or a big slowdown caused by Delta or some other variant — could alter the persistently sunny outlook.
But so far, the lingering pandemic has lifted the stock prices of companies whose profits are tied to it directly — Moderna’s 260 percent rally this year has made it the S&P 500’s best performer — and those positioned to gain from the messy economic recovery, like metals manufacturers, energy companies and semiconductor makers.
The breadth of the boom was clear in July. Second-quarter earnings results were expected to be generally strong, but trounced expectations: Nearly 90 percent of companies exceeded analyst forecasts, the highest such level of “beats” on record, according to Refinitiv data going back to 1994.
“Earnings numbers were spectacular,” said David Kelly, chief global strategist at J.P. Morgan Asset Management. “You had an extraordinarily strong rebound from the recession.”
Typically, periods of strong economic growth and red-hot profits are also accompanied by high or rising interest rates, which tend to act as a headwind for stocks. But not this time.
Despite higher-than-expected inflation, the Federal Reserve has signaled it intends to keep rates low even as it prepares to slow — or “taper” — the money-printing and bond purchases it began at the start of the pandemic.
During a closely watched speech last week, Jerome H. Powell, the Federal Reserve chairman, stressed that rate increases were far away, and that the Fed was attuned to the risk posed by the Delta variant of the coronavirus. His comments helped to catalyze a fresh scramble higher for the market.