Here’s why Citi says stocks have rallied — and why new fuel for gains is now needed

The S&P 500 SPX, -0.01% has surged 4% in May and has jumped 17% over the last two months, the best two-month stretch since April 2009, two months before the last recession ended. The rally hasn’t just been in the U.S., either — the MSCI All-Country World index 892400, +0.44% has climbed 33% from its March low.

Citing EPFR data, he says $120 billion of flows came out of stocks since February. The one difference between now and the depths of the crisis is that investors are no longer short U.S. stocks, and their bets against European equities are less severe. “We suspect that the sharp rise in stock markets has been driven by a closing of shorts. From here, a move higher will need new longs and inflows,” he said.

He has some doubts about that. Citi’s measure of panic vs. euphoria has swung back to euphoria levels, suggesting a 70% likelihood that markets are lower in the following 12 months.Economists at Morgan Stanley say they are increasingly convinced the bottom was reached in April.

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Why Rising U.S.-China Tensions Are The Biggest Threat To The Stock Market RallyTwo threats to the stock market rally are China’s growing belligerence and the slow reopening from COVID-19 lockdown in big states, such as New York, Illinois and California. Over 100,000 dead in the USA in 10 weeks from Coronavirus, 41 million unemployed, 25% of workforce out of work, several small companies going out of business permanently, and bankruptcies and evictions soaring. No cure or vaccine. Country is more divided than ever. balloon or Harley, if you had to choose one, which would it be
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