[laurentl]

Matt Levine (Bloomberg) gives a convincing explanation in a recent newsletter: https://www.bloomberg.com/opinion/articles/2020-06-01/stocks...

In a nutshell, he argues that stock price is a reflection of the long-term value of a company (“the present value of the company’s expected future earnings”, which is what stock price theoretically is). With low interest rates, the bad results of 2020 are drowned out by the expected return to normal earnings in the coming years.

> A pandemic crushes revenues. Stocks fall on general uncertainty and a fear of financial crisis and widespread bankruptcies, which would wipe out profits in perpetuity. The fears of financial crisis are resolved, more or less by the Fed and Congress pumping money into companies to prevent panic, so the bankruptcy risk is more contained. Stocks return to a price level that suggests a terrible year, followed by mostly normal.

As an aside, I highly recommend subscribing to his Money Stuff newsletter. Entertaining and pedagogical, it’s a great way to learn about the theory, inner workings and quirks of modern finance.