The S&P 500 surged Monday after New York coronavirus fatalities declined for the first time, while Italy and Spain reported the fewest deaths in more than two weeks. To Peter Cecchini, investors aren’t thinking clearly enough about what it all means.

As the Cantor Fitzgerald strategist sees it, a lower death rate suggests self-isolation and staying indoors are working. While obviously the best possible news for society, its meaning for markets comes with important caveats, among them the economic cost of prolonging the lockdown.

“What the takeaway should be is that we need to continue this policy, perhaps for even longer than we originally thought,” Cecchini said. “I want to be as optimistic as the next guy about this, but I think we need to be realistic.”

Over and over during the outbreak it has been shown how relief in stocks reflects a different calculus than relief in the real world. Markets look forward and backward to a greater degree than most human minds, balancing guesses about a sometimes-distant future with all the pain already priced in. Both considerations can cause the actions of investors to seem cold blooded at times, particularly when viewed through narrow windows.

Right now, some worry, traders are getting ahead of themselves. Shelter-in-place guidelines have already wrecked havoc on retail spending and sparked the biggest plummet in U.S. employment since the last recession. Still to come is a reckoning for debt-laden corporate issuers with ratings at risk.

“The lock-down is economically ruinous -- make no mistake about it,” wrote Charles Dumas at the TS Lombard research shop. “We have a stock market in denial, very far from any sign of capitulation. The second leg down of this bear looks as if it will be worse than the first.”

Of course, confidently ascribing any reason for optimism, or pessimism for that matter, has been a fool’s errand in a stock market swinging 5% a day. Forceful sell-offs are met the next day with a strong rallies, and vice versa. Feedback loops are everywhere -- including the bullish possibility that successfully arresting the death rate will put an early end to the most drastic social-distancing protocols.

But with the S&P 500 extending its gain from the March 23 bottom to 17%, and many attributing the strength to signs of the virus’s spread slowing in hot spots around the globe, the bull case is coming under scrutiny. If virus cases are leveling off, it’s because social distancing is working. The longer people have to remain in their homes, the longer businesses remain shuttered. It’s a conundrum policy makers are speaking to.

A diminished fatality rate is “hopeful, but it’s also inconclusive, and it still depends on what we do,” said New York Governor Andrew Cuomo at his Monday news conference. “These models all have a coefficient of ‘what we do,’ and how successful we are at social distancing etc., and from our decision-making point of view, it doesn’t really mater if we hit a plateau or not, because you have to do the same thing. If we are plateauing, we are plateauing at a very high level.”

Efforts to interpret the rally were everywhere on Wall Street. Strategists at JPMorgan Chase & Co. recommended trading on what looks to be close to “a favorable inflection” for the spread of the coronavirus. Quantitative and derivatives strategists including Shawn Quigg and Marko Kolanovic suggested clients position for a “sharp short squeeze” in value stocks.

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