U.S. Equity Markets Stubbornly Ignore the Doom Everywhere

The bearish case for the U.S. stock market is so obvious, it can be hard to believe that there’s any argument—let alone that bulls have often been winning it in the past few weeks. The U.S. economy is in the throes of such a deep economic downturn, with 36 million unemployment claims filed in the past eight weeks, that the word “depression” is being thrown around increasingly casually. A period of deflation is upon us, with the core measure of consumer prices declining in April by the most on record in a sign of the stresses many companies are facing in a locked-down world.

Hopes for a quick—or V-shaped—recovery are fading as reality sinks in that reopening the economy won’t necessarily cause consumer behavior to revert to its old form as long as Covid-19 continues raging through the country, killing an average of more than 1,400 Americans a day in the week ended May 16. Only a few major companies now expect a V-shaped rebound, according to Goldman Sachs Group Inc.’s review of the first-quarter earnings season. Most managers now expect the economic charts to look more like the letter “U” or “L,” meaning the recovery will be slower and more gradual than optimists believed at the beginning of the crisis. About 180 of the companies on the S&P 500 pulled earnings guidance during the period, the Goldman report showed.