After the fastest descent into a bear market ever in the first quarter of 2020, the capital markets posted a rebound of historic proportions in the second quarter of 2020. The S&P 500 Index had its best quarter since 1998 and the NASDAQ Composite Index had its best quarter since 1999. Despite S&P 500's first and second quarter earnings being estimated at down -48% and -30% from 2019 levels, fiscal and monetary stimulus programs continued unabated across the globe giving financial assets a mighty tailwind. Meanwhile, fallout from the pandemic shutdowns continued to wreak havoc on Main Street as government officials at all levels struggled with how to deal with the surge in cases that have accompanied re-openings. Amidst the many uncertainties/ points of contention being grappled with (mask or no mask, sports or no sports, in person school or online), the Federal Reserve and its Chairman have offered much more certainty. Along with the Treasury, they have unambiguously embraced the role of capital markets insurance provider. The Federal Reserve balance sheet surpassed $7 Trillion, a level nearly eight times its level prior to the financial crisis of 2008 and nearly 50% higher than its peak after 2008.
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