The great investor, Stanley Druckenmiller, recently said “earnings don’t move the overall market: It’s the Federal Reserve Board. Focus on central banks and focus on the movement of liquidity. Most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets.”
I’ve been doing the rounds seeing investors over the last week and every single meeting starts with “how on earth are equity markets currently doing so well, despite coronavirus?”
The answer is because the market sees the increased chance of further liquidity pumping from central banks and potentially even lower cash rates. The People’s Bank of China (PBOC) has aggressively pumped liquidity, while the Fed continues to expand its balance sheet via buying large quantities of overnight repos.