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What's going on?

Hold onto your hats, cowboys: a leadin’ US stock market index, the Dow Jones Industrial Average, is now back in a “bull market”. Yeehaw.

What does this mean?

Analysts have credited the Dow’s rise to the recently announced $2 trillion of economic stimulus the US government hopes will help workers and companies survive the pandemic. Some also reckon international investors might’ve been encouraged to buy up less expensive-looking US stocks after the US dollar’s value dropped slightly versus other currencies last week.

Whatever the reason, this is the second time the Dow’s made history this month. The first was when it dropped over 20% – and entered a bear market – in a record twenty days. The second was when that bear market became the shortest-ever, with the Dow rising over 20% last week and re-entering bull territory.

Why should I care?

For markets: Whoa there.

Stock markets are inherently forward-looking, which might be why investors sold off stocks throughout last month in anticipation of a coronavirus-induced global recession. So even though we probably are in one right now, there’s no official data to back that up just yet. Still, investors’ recent about-turn on the Dow could suggest they’re beginning to look past the economic declines predicted for this quarter and next. For the rest of the year and beyond, they might be hoping low interest rates and government cash boosts will give growth a much-needed tailwind.

The bigger picture: Ain’t their first rodeo.

Whether the US stock market’s initial rebound will last partly depends on how successfully the country gets coronavirus under control, as well as how quickly the economy’s able to return to normal afterward. Optimists think a short-term “blip” shouldn’t keep investors from buying shares for the long term. But naysayers argue stocks historically take around 18 months to recover after signs of a recession – meaning this rise will be short-lived (tweet this).

Originally posted as part of the Finimize daily email.

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