Back-from-the-dead stocks show high tolerance for trouble

Name all the economic rationales you want for the rebound, there’s something to be said for just having a high threshold for pain.

That may be the simplest explanation for the recent path of US stocks, which just strung together the longest streak of weekly gains in almost a year, despite evidence a recession is at hand as the Federal Reserve battles inflation. The economy cools, war flares and officials vow further hikes -- and investors somehow look past it, pushing tech stocks tracked by the Nasdaq 100 into a bull market on Wednesday.

While damage done in the first half obviously helped, curbing valuation excesses, several less-visible factors may be playing a role in keeping the calm. A note from JPMorgan Chase & Co. researchers this week pointed to supply-demand benefits created by buybacks and the dearth of new equity offerings, while others cite the hard-to-perturb presence of buy-and-hold investors in the expanding chunk of the market owned by passive funds. 

“It’s the combination of share repurchases and the stability of passive capital that is acting as an anti-gravity force,” Lawrence Creatura, a fund manager at PRSPCTV Capital LLC, said in an interview. “They’ve been buying, and it’s on autopilot. That’s definitely a source of stability.”