Solid market performance in the face of such a weak economy has led to a lot of questions — and perhaps a little disbelief — about where this optimism is coming from, according to FS Investments in its “Why markets are floating past the economic collapse” report.
The rally in the S&P 500 Index, the large-cap bellwether tied to so many retail and institutional portfolios, could use a little dissection, according to FS Investments.
First, markets should be careful about reading too much into the past seven weeks of gains. The S&P 500 is down 14.9 percent from its Feb. 23 high despite a strong recovery in April and is down 10.8 percent year to date. In the past two months, markets have been exceptionally volatile. The drop in valuations in February was so acute that the recovery over the past month has seemed especially positive. According to FS Investments, if the market had slowly drifted from March 1 valuations to today, we would simply be on a more nor
