Stocks, bonds and commodities are heading for their strongest simultaneous four-month rise on record, highlighting the breadth of the market recovery during the 2020 economic slowdown.

Through Thursday, the S&P 500 and S&P GSCI commodities index were each up more than 25% since the end of March, while the Bloomberg Barclays U.S. Aggregate Bond Index added more than 3% in that span. If the gains hold during the final week of July, this would be the first time that the gauges all rose that much in a four-month period, according to a Dow Jones Market Data analysis going back to 1976.

Investors and analysts attribute the broad rise in financial markets to faith in government and central-bank stimulus programs, hopes for vaccine development and wagers that the coronavirus crisis will spell opportunity for a number of large but nimble, well-placed companies at the expense of others whose struggles are deepening. The broad advance is prompting many investors who had been skeptical to pare back their cautious wagers and join the rally, giving it further fuel.

Many portfolio managers believe the gains are justifiable, given expectations that economic conditions will improve and the success of policy makers in unfreezing debt markets whose functioning is crucial to American corporations. At the same time, some analysts see recent signs of a “melt-up” in some market niches, particularly around technology, in which investors are buying assets in large part simply because they are rising. Traders are riding the momentum in everything from large technology stocks such as

Apple Inc.

to the precious metal silver.

Investors usually expect stock and bond prices to move in opposite directions. Bonds are considered a safe, stable asset, so investors tend to sell stocks and buy bonds when they are nervous about the economy. When investors' outlook brightens, they typically sell bonds and buy stocks, taking on more risk. When stocks and bonds both rise together, it tends to prompt debate about what signal the financial markets are sending.  

This is an experimental feature. Please let us know what you think.

Such powerful rises are a concern for analysts who worry that the investments will suddenly fall in tandem if markets or the global economy face a fresh shock. Many investors flush with cash raised during the early-year turmoil are amplifying bullish wagers while also paying more to hedge their bets.

Economists have long used letters of the alphabet like V and U to describe economic recoveries. But the coronavirus downturn is so different from past recessions that economists are coming up with new shapes to describe the potential recovery. WSJ explains. Illustration: Jacob Reynolds

“People are hopping on the train, and they’re also looking to get anything else in their portfolio for when the day of reckoning comes,” said Christopher Stanton, chief investment officer of Sunrise Capital Partners. Mr. Stanton is betting against the dollar, expecting Federal Reserve stimulus programs to continue weakening the currency, boosting investments from stocks to commodities that are priced in dollars.

He warned that uncertainty about government or central-bank policies could hit markets, pointing to November’s presidential election as one possible spark for a reversal. Many investors fear presumptive Democratic nominee Joe Biden will raise corporate taxes if elected.

Cumulative performance since end of March
S&P 500 sectors, commodities and bonds



Note: Performance of commodities and bonds as measured by the S&P GSCI commodities index and the Bloomberg Barclays U.S. Aggregate bond index respectively. Bond index data are through July 23.
Source: FactSet

The S&P 500 hit its highest level in five months on Wednesday before declining late in the week. It is about 5% below its February all-time high. Numerous other investments extended a weekslong climb, including commodities such as oil and corporate bonds.

Expectations that the Fed will keep rates near zero have kept the benchmark 10-year U.S. Treasury yield near its March record low. Yields fall as bond prices rise, and steady demand for bonds pushed investment-grade corporate-bond yields to all-time lows last week.

Nela Richardson, an investment strategist at Edward Jones, said the firm recently reduced its cash holdings and increased positions in high-yield corporate bonds, citing the nonexistent returns from holding cash with rates near zero.

“We’re all in a low-yield environment,” she said.

Markets continue to climb even with many large companies painting a murky picture of the economy, highlighting investors’ faith in further stimulus programs. Last week’s swings came after European Union leaders agreed on a more than $2 trillion spending package. Many investors are also hopeful that U.S. lawmakers will soon reach a deal on further coronavirus aid.

“You don’t want to fight the Fed, the world’s central banks or the world’s governments,” said Thomas Martin, senior portfolio manager at Globalt Investments. The firm’s investment in stocks is in line with the benchmark it tracks and it has been holding gold in its asset-allocation strategies.


What do you think about “melt-up” concerns? Join the conversation below.

Investors buy gold during times of uncertainty, and precious metals are also benefiting from the flood of money being used to prop up the world economy. Some analysts expect the stimulus to stoke inflation, eroding the purchasing power of paper money and making the metals more expensive. But even within metals, traders see signs that investors are flocking to the sector because prices are going up.

Such moves often happen after the number of investors holding an asset declines, then money managers seek to catch up to a rising market. Investor positioning was recently depressed across asset classes following the early-year market selloff. Now, investors are gradually increasing those positions, a trend that could continue supporting stocks,

Deutsche Bank

analysts said in a recent note.

One factor worrying investors: A large share of the stock market’s gains has been concentrated in tech behemoths such as Apple, Inc.,

Google parent

Alphabet Inc.


Facebook Inc.

that report earnings this week. Investors retreated from tech stocks late last week, dragging down major indexes.

Analysts say there still isn’t excessive optimism in markets generally, though highflying stocks like electric-auto maker

Tesla Inc.

are a concern for many.

“For a lot of people, it’s hard to look at a stock like [Tesla] that goes up and up and up and not feel like you’re missing out,” said Victoria Fernandez, chief market strategist at Crossmark Global Investments.

The firm has pared back its positions in some large tech companies that have risen sharply like Apple and

Microsoft Corp.,

while increasing its holdings of cyclical stocks more tied to the economy such as

JPMorgan Chase

& Co.

Write to Amrith Ramkumar at

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

You Might Like
Learn more about RevenueStripe...