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Though it may not feel like it, the S&P 500 index just experienced its strongest 16-day period since 1938.

Each day brings more news – some of it encouraging, some of it not – about efforts to curtail the spread of COVID-19 and reopen the U.S. economy. Lawmakers at the federal, state and local levels are trying to find the appropriate time to reopen the economy, as well as ways to support people whose lives and livelihoods have been affected by the coronavirus pandemic.

While it may seem odd, the S&P 500 index just experienced its strongest 16-day period since 1938, according to Chief Investment Officer Larry Adam. From the market lows that brought an end to the bull market in late March, Adam sees two forces driving the rally: unprecedented monetary and fiscal support from policymakers, plus signs the health crisis is improving and discussions of re-opening the economy are forthcoming.

“Further actions from the U.S. Federal Reserve and Congress are likely to continue to support the economy,” Adam said. “However, we believe the next up-leg in the equity rally will require more favorable news on the potential for a therapeutic, antibody or vaccine.”

Data released earlier this week shed some light on the effect stay-at-home orders to curtail the spread of the virus are having on the economy. Notably, unemployment claims over the four-week period ending April 11 indicate much of the job creation since the 2008 financial crisis has been erased, Chief Economist Scott Brown said.

“While economic activity is expected to contract sharply in the second quarter of 2020, the recovery outlook is uncertain,” Brown said. “It’s dependent on the virus; the development of treatments, medicines and a vaccine; and the unwinding of social distancing. The economy will rebound, but a full economic recovery is expected to take time, and there will be long-lasting changes in consumer behavior and global trade.”

A key to reopening the economy, according to healthcare policy analyst Chris Meekins, is an increased capacity to test for the virus as a means to help combat spread.

“We continue to emphasize that American testing capacity and surveillance measures are not where they need to be to institute a test-and-isolate strategy that could ease our transition back to normal,” Meekins said. “As we approach another probable round of stimulus relief, we anticipate more funding for state and local governments to spur contact tracing and surveillance.”

Investors continue to commit cash to “risk-off” assets in the fixed income market, such as Treasuries, according to Chief Fixed Income Strategist Kevin Giddis. The yield on the 10-year Treasury note is once again close to the 0.54% low reached on March 9.

“And I would rather not test that if we can help it, because it would mean the confidence level is dropping and the fear leveling is increasing,” Giddis said.

While the recent market bounce has been impressive, uncertainty remains. There likely will be plenty of potential market-moving information to come in the days and weeks ahead.

“Just as the 35% collapse in 26 days was too far, too fast, the rally has been, as well, in our view,” said Joey Madere, a senior portfolio strategist with the Equity Portfolio & Technical Strategy group.

“In assessing previous recessionary bear markets, it would be highly unusual for the S&P 500 to just glide back to the previous highs,” Madere said. “On the other hand, it is very common for exhaustive selloffs to be followed by sharp bounces, and then a grind-it-out pattern with potential retests as more information surrounding the issues of the day is gained. We would use pullbacks as opportunities to accumulate stocks for the long term.”

As we all gain our bearings, your advisor will continue to provide relevant and timely information. Please reach out to him or her with any questions you may have about your unique financial circumstances.

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Investing involves risk, and investors may incur a profit or a loss. All expressions of opinion reflect the judgment of Raymond James and are subject to change. There is no assurance that any of the forecasts mentioned will occur. Economic and market conditions are subject to change.