What Are Investors Thinking?

The U.S. stock market has climbed back even with the country in crisis. Psychology is part of the story

- Pat Regnier

Americans are applying for jobless benefits by the millions, the economy is in recession, and cities across the U.S. have seen some of the largest protests in decades in response to police violence. Covid-19 deaths have topped 110,000, and the virus is still very much with us, not only in the U.S. but across the world.

And still: As of June 10, the S&P 500 was up almost 43% from its March low. Since the bottom, stocks around the world have recovered more than $20 trillion in value. And the tech-heavy Nasdaq has risen more than 11% in 2020. Wall Street strategists—who are as flabbergasted as the journalists—have found with vivid hindsight the obvious explanations in the numbers. They’ve pointed to a surprise uptick in jobs, interest rates plunging, cheap valuations on certain kinds of stocks, and short-sellers being forced to buy shares as they scramble to cover their too- pessimistic bets.

But none of that fully explains what’s happening in the minds and emotions of investors. How do you press the “buy” button at the same time you see mass protests and a painful economic shutdown? Part of the answer is that many financial pros are relatively distant from these events. But even the market hobbyists who populate Reddit, Stocktwits, and Twitter and the everyday individual investors who’ve opened record numbers of new brokerage accounts have trained themselves to disconnect stock prices from the world outside their own doors.