When it came to financial markets in 2020, the most frequently asked question was why. Why, in the midst of a global pandemic that has killed some 1.7 million people worldwide and plunged the economy into the worst crisis since the Great Depression, did equity markets stage a historic rebound to reach new highs and become completely disconnected from reality? And it wasn’t just stocks, as anything smacking of carrying any semblance of risk, from junk bonds to Bitcoin, had epic rallies.

Everyone has an explanation for how markets performed. They range from the cerebral (markets are “forward-looking” and investors are anticipating a roaring economy once COVID-19 has been eradicated) to the cynical (just buy the dip). True, the market is always about what will happen rather than what has happened, and it’s been highly profitable in recent years to buy whenever the market pulls back. Still, neither adequately explains the jaw-dropping 66% surge in the MSCI All-Country World Index of stocks from its low in late March, the record-low yields in junk bonds, the more than five-fold increase in the price of Bitcoin or any of the other seemingly inexplicable market moves.

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