ROBERT ARMSTRONG: Welcome to Charts that Count.

What's wrong with this picture?

The red line is initial US jobless claims

of which there have been about 26 million

in the past five weeks.

The blue line is the S&P 500, which

is up almost 30% from its lows in the latter part of March.

Now, no one wants to pile a financial crisis on top

of a public health crisis.

But it is very fair to ask why the stock market is feeling

so enthusiastic when millions of Americans are out of work,

and hundreds of thousands of businesses are still shuttered.

There are two basic points to keep in mind

about this at the outset.

The first is that the stock market is not

the consumer economy.

The S&P 500 is about 25% tech stocks.

Another 15% is in health care.

And both of these sectors have done very well

through the crisis, supporting the rest of the index.

The second point is that monetary policy still matters

and matters immensely.

Central bank's easing of interest rates

and their purchases of bonds have driven fixed income yields

down to almost uninvestable levels.

This in turn forces investors who require real returns

into the stock market.

But is either one of these factors

really enough to explain the strength we see in stocks?

I don't think that they do.

I think there is another assumption at play--

the so-called V-shaped recovery, the idea

that the economy, once the virus crisis passes,

will rebound very quickly and hit its old levels of growth.

There is also the assumption that this V-shaped recovery

will happen relatively soon.

But are we really so confident in this?

Last week, the US automaker Ford issued bonds

at a yield of nearly 10%, showing just how much investors

demand to be paid if they are going

to put their money at risk in a company that

depends on the strength of the American consumer.

Oil for future delivery recently fell to negative price.

The market is not as strong as it seems.

Be careful out there.

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