The latest earnings season in the U.S. is the weirdest in living memory

Bob Chapek, Disney's boss, sounded a cheerful note as he announced the entertainment giant's quarterly results last week.

Its newish streaming service, Disney+, has acquired over 60 million subscribers in less than a year, one-tenth the time it took Netflix to amass such an audience. "Mulan," an upcoming blockbuster, will be released on Disney+ in September.

"Despite the ongoing challenges of the pandemic, we have continued to build on the incredible success of Disney+ as we grow," Chapek said. The company's share price jumped by 5%.

If you tuned out the first part of Chapek's statement — and six months' worth of COVID-19 news — you might conclude that Disney just had a bumper quarter. In fact, as its theme parks shut down, cinemas emptied and battered advertisers stinted on commercials on its television networks, the company lost $4.7 billion. The reason for the market chirpiness is that things could have been far worse.

Disney's experience sums up that of corporate America more broadly.

Investors have been casting about for any signs of a rebound from the pandemic-induced recession. Real GDP shrank at an annualized rate of nearly 33% in the second quarter. And yet, with interest rates — and thus returns on safe assets like Treasury bonds — close to zero, money has poured into equities.

American share prices have risen by more than 40% from their trough in March. The S&P 500 index of big firms is near an all-time high; the tech-heavy Nasdaq market reached it last week. The feeling among investors that "there is no alternative" to stocks is so pervasive that they have dusted off an old acronym: TINA.

Now it seems they may have erred on the side of gloom. Jonathan Golub of Credit Suisse, a bank, calculates that for those firms which have already reported their results for the most recent quarter — a group representing 84% of the S&P 500's market capitalization — earnings have beaten hyper-bearish estimates by a total of 24%.

Bulls see other hopeful signs. After a plunge earlier this year, capital spending grew at its fastest monthly pace since Morgan Stanley, an investment bank, began tracking it in 2004. New orders for factory goods rose by 6.2% in June. JPMorgan Chase believes that a global "synchronized cyclical recovery from the COVID-19 crash has started," with manufacturing leading the way.

Hang on a minute. The green shoots offer hope and earnings may have beaten expectations. But, as David Kostin of Goldman Sachs notes, the bar was very low.

Quarterly sales fell by an average of 10%, year on year, at S&P 500 companies which reported by the end of July. Some industries suffered a bigger hit. And the crunch is worse at smaller firms. Kostin calculates that quarterly earnings for S&P 500 companies were down by about 35%. For those in the Russell 2000 index of smaller firms, they had nearly evaporated entirely.

Another underappreciated threat to share prices comes from government. Tobias Levkovich of Citigroup points out that the "womb to tomb" safety net in Europe provides more generous and longer-lived relief in a downturn than in the U.S.