Looking within the entrails of the credit market, Watling notes that spreads of high-yield bonds remain elevated, suggesting continuing fear of defaults. (It is hard to reconcile this with historically high valuations for small-cap stocks.)  Meanwhile, a perverse effect of the U.S. government’s move to protect people laid off due to Covid from having to make mortgage payments is that banks are proving more reluctant to lend. This is a natural result of being denied some income, but it means that spreads of 30-year mortgage rates over equivalent Treasury yields are almost at the all-time high set in the wake of the Lehman Brothers bankruptcy in 2008:

I think the case is made that financial markets aren’t expressing any general belief in a swift end to lockdowns followed by a swift economic recovery. Anyone who has bought stocks on that basis is likely to be disappointed. The next few months are likely to be dominated by the dueling narratives of the new cold war and the reopening after coronavirus.

But how do we explain the psychological breakthroughs of the day? We need to be cautious about technical analysis. Trends and patterns in markets offer a better guide to investor psychology than anything else in extreme times like this, but there are few hard and fast rules. The Fibonacci sequence, first discovered by a Medieval scientist observing the mating of rabbits, isn’t a clear determinant of market success. Neither is the moving average. But maybe, just maybe, passing landmarks like this can have a psychological impact. Maybe, just maybe, the breakout in the morning took the market to levels where investors were forced to re-examine exactly why they had taken things so far.

Survival Tips
Sport is beginning to make a tentative return to our lives, but many of us would be much happier if there were more of it, or at least enough to return daily life to some familiar rhythms. What has been good about the lockdown, however, is that it is prompting more and more of us to watch old sports events in their entirety. Many have famous endings and you forget the amount of excitement, and the number of moments that might have become classics of their own before the final denouement.

Let me offer two examples, both of which ended in extraordinary drama. In both cases, the famous final moment proves to have had plenty of excitement before it. First try Game 7 of baseball's World Series in 1960, which ended with a home run by Pittsburgh's Bill Mazeroski. It is still the only World Series game 7 to end with a walk-off home run, but there was much more to it than that. The see-saw drama goes on for two hours and it's extraordinary.

Then try the final game of England's football season in 1989, in which Arsenal beat Liverpool 2-0, thanks to a goal in added time, and thereby snatched the league title from them. Michael Thomas's strike was the most famous and dramatic in English football history until Sergio Aguero also decided a championship in added time, for Manchester City in 2012. But again, the whole game is extraordinary. You don't have to be a fan of any of the teams involved (I'm not) to find the drama intoxicating. And while everyone who knows anything about baseball, or about English football, knows how the games end, it's amazing how exciting they are to watch again. Until live sport returns, it helps us to survive.

This article was provided by Bloomberg News.

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