Optimism reigns in global stock markets, particularly in the US.  After falling around 30% when the lockdowns to contain COVID-19 virus pandemic were imposed, the US stock market has jumped back 30% in April.  Why? Well, for two reasons. The first is that the US Federal Reserve has intervened to inject humungous amounts of credit through buying up bonds and financial instruments of all sorts. The other central banks have also reacted similarly with credit injections, although nothing compares with the Fed’s monetary impulse.

As a result, the US stock market’s valuation against future corporate earnings has rocketed up in line with the Fed injections. If the Fed will buy any bond or financial instrument you hold, how can you go wrong?

The other reason for a stock market rally at the same time as data for the ‘real’ economy reveal a collapse in national output, investment and employment nearly…