(Bloomberg Opinion) — Don’t fight the U.S. Federal Reserve — repeat that mantra until it sticks.Jamie Dimon, the boss of JPMorgan Chase & Co., put it well this week. “This wasn’t the bazooka,” he said, referring to Jay Powell’s response to the coronavirus crisis. “The Fed took out the whole military and applied it. Just announcing these programs reduced spreads (the difference between corporate bond yields and their benchmarks) in the market. It’s going to save a lot of small businesses.” In the past month, the equity market’s glass has gone from pretty much empty to at least half full and that’s down to the coordinated fiscal and monetary effort from authorities far and wide. You want some quantitative easing? Please, have some more and take some for the journey home. Even those foot draggers at the European Union are talking about radical fiscal action. We won’t really see a V-shaped economic recovery, but it seems seem like we’ve stopped the L.Nonetheless, this is a recovery based so far on asset-price inflation rather than any economic data. Central bank and government action may have restored financial valuations but real incomes will still suffer dramatically for a long while to come. Unemployment and diminished consumption cannot be magicked away.The stock market is looking even further into the distance than usual to justify its valuations, which is sometimes hard to square away against a constant stream of dire economic statistics and evaporating company earnings. Since QE came to life during the global financial crisis, it has paid for investors to cast aside their usual forward-earnings analysis and focus instead on the rising tide of money. The central banks have learned their post-2008 lessons and have barely put a foot wrong this time. This is having uneven effects, however. The bulk of the stimulus is coming into investment-grade assets because that’s where central banks feel more comfortable. Credit spreads have recovered most in BBB and A-rated bonds. High-yield yield assets improved sharply at first, but this has abated. The spread between the yields on investment-grade debt and those of junk bonds is still nearly double the levels seen in February. Similarly, new debt issuance is motoring again but only for the better-quality names. While U.S. banks such as Citigroup Inc. and Wells Fargo & Co. are returning for the fifth or sixth time this year to replenish capital, the junk sector has been restricted to one-off selective deals — often with eye-watering yields.The change in stock market sentiment isn’t just about QE. The oil price collapse has come and gone and fears of a devastating second wave of Covid-19 are easing. Short-selling bans have quietly been lifted in several European countries too, and some of the recent improvement may be explained by that. The sound of economies cranking back into life can just about be made out over the whirring of the monetary printing presses, allowing even bombed-out old economy stocks to recover, not just the new technology darlings.Notably, some of the recent action has been in high-dividend stocks, which had been forced to skip shareholder payouts at the height of the crisis. Investors had feared that the dividend bans might last several years; now they think it may be a quarter or two. Many investment funds work off a dividend-yield model.Investment managers may be doing the natural thing right now and chasing the rising stock market indexes, but that doesn’t mean they’re brimful of confidence. The Bank of America fund manager survey for May shows extreme bearishness pervades, with only 10% expecting a V-shaped recovery and 68% expecting stock prices to fall. Given the recent positive news on the virus and the gradual ending of lockdowns, the June survey might be different.The fiscal response will determine how the economy recovers over the long term but the monetary triage has worked better than anyone could have expected in those ugly days of March. For that we should be grateful, and for the stock market’s semi-rational exuberance.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Marcus Ashworth is a Bloomberg Opinion columnist covering European markets. He spent three decades in the banking industry, most recently as chief markets strategist at Haitong Securities in London.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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(Bloomberg) — Nasdaq 100 Index futures fell on a report Donald Trump is preparing to sign an executive order that could threaten to penalize Facebook Inc., Google and Twitter Inc. for the way they moderate content on their sites.Contracts for June delivery on the Nasdaq 100 fell as much as 0.8%, before paring losses to 0.1% as of 2:50 p.m. in Tokyo. Trump’s upcoming executive order aims for federal regulators to review a law that spares tech companies from liability for comments and content posted by users, the Washington Post reported. Investor sentiment was also damped by deteriorating U.S.-China ties.“U.S. tech stocks are dropping on profit taking and risk aversion, as they are at the forefront of the U.S.-China cold war,” said Nader Naeimi, the head of dynamic markets at AMP Capital Investors Ltd. in Sydney. In addition, there is news that “Trump is preparing to sign an executive order that could threaten to penalize Facebook, Google and Twitter.”Trump is poised to take action Thursday that could bring a flurry of lawsuits down on Twitter, Facebook and other technology giants by having the government narrow liability protections that they enjoy for third parties’ posts, according to a draft of an executive order obtained by Bloomberg. Although Nasdaq 100 futures declined, contracts on other indexes advanced. Futures on the S&P 500 gained 0.2% and those on Dow Jones Industrial Average climbed 0.5%. The underlying S&P 500 climbed to the highest since early March on Wednesday, holding above 3,000 level and its average price for the past 200 days.It’s possible that Nasdaq futures are falling on reports of an executive order, “but the U.S. First Amendment is pretty clear, and the White House has very little reach over corporate behavior,” said Michael McCarthy, chief market strategist at CMC Markets Asia Pacific Pty. “Most traders I speak to see this as a hollow threat.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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