Leaders of the biggest financial companies are getting more optimistic about an economic rebound as the pandemic lockdown eases, but say recent stock gains might have overshot reality.
“The market is assuming that we’re not going to see a severe second wave or third wave” of Covid-19, and that treatments will become available to cushion the impact of new outbreaks, BlackRock Inc. Chief Executive Officer Larry Fink said Wednesday at a virtual industry conference. “I do believe jobs are going to be slower coming back than other people believe.”
Stock-market optimism was particularly pronounced this week, with some of the best performers, including Carnival Corp. and United Airlines Holdings Inc., among those hurt most by the pandemic. The S&P 500 has increased 36% since reaching its lowest in almost 3 1/2 years on March 23.
Signs that economies are starting to come to life and prospects for a vaccine helped fuel the gains, as did upbeat comments from policy makers and business leaders. JPMorgan Chase & Co. CEO Jamie Dimon said some borrowers who requested forbearance are still making payments, and banks could be done adding to loan-loss reserves after this quarter.
“You could see a fairly rapid recovery,” the leader of the biggest U.S. bank said Tuesday at a virtual conference. “The government has been pretty responsive, large companies have the wherewithal, hopefully we’re keeping the small ones alive.”
More positive economic data emerged Thursday with Labor Department figures showing states’ jobless rolls shrank for the first time during the coronavirus pandemic, a sign people are starting to return to work.
The Federal Reserve has effectively cut interest rates to zero, pumped trillions of dollars into the economy and announced plans for nine emergency lending programs. At some point, though, the stimulus will come to an end.
“You can’t prop up the stock market forever,” Dimon said.
Financial stocks have also been among the biggest winners in the latest market surge, with the S&P 500 Financials Index up 17% since May 13. Citigroup jumped 29% over the period, Morgan Stanley increased 26% and Bank of America Corp. added 23%.