Banks are blowing up, bonds are trading like a recession is nigh, yet stock indexes have advanced over the past week and a half. What gives?
The bullish logic requires a bit of mental gymnastics. There may be another banking-crisis shoe to drop, the turmoil could result in tougher lending standards, and the odds of a recession later this year appear to be higher. But the measures in response by central banks and other financial authorities in the U.S. and abroad amount to a new wave of quantitative easing, or QE, which means higher share prices, argue the bulls.