The Standard & Poor’s (S&P) 500 Index finished the week within a whisker of its February high, reported Randall Forsyth of Barron’s.
It’s a remarkable feat. The stock market has recovered in just 175 days. Historically, comparable recoveries (those following market drops of 20 percent or more) have taken about four years, reported Vildana Hajric, Lu Wang, and Claire Ballentine of Bloomberg Quint.
“The sharpness and speed of the downturn – and the immediacy of the overwhelming liquidity and fiscal response from the Federal Reserve and Congress – forestalled the kind of grinding, purgative action of typical bear markets, which wrings out excesses and resets valuations lower. There was also not the shift in market leadership that usually occurs in the crucible of a bear market,” reported Michael Santoli of CNBC.
The recovery is also remarkable because it occurred in the midst of a recession (that some have labeled a depression) and during a period of extraordinarily weak corporate earnings. It’s possible investors are focusing on the fact economic and earnings data has been ‘better-than-expected.’ For instance:
Last week, in a paper titled Reasons (Not) To Be Cheerful: Certainty, Absurdity, and Fallacious Narratives, GMO’s James Montier wrote, “Never before have I seen a market so highly valued in the face of overwhelming uncertainty. Yet today the U.S. stock market stands at nosebleed-inducing levels of multiple, whilst the fundamentals seem more uncertain than ever before.”
The bottom line is the economy and company profits have contracted sharply while stock market valuations have rocketed higher. The sonic boom of performance startled many market professionals. Strategists tracked by Bloomberg expected the S&P 500 to finish December at 3,117 or about 8 percent lower than it started. They may be wrong, but they may be right. No one is certain what lies ahead.
Life: Pandemic style. The pandemic has changed the ways people all over the world think and interact with one another. It has also inspired artists and designers to find solutions to pressing problems, such as the need for social distancing. Here are a few inventions that may help us cope with pandemic life and help us find a new normal:
“…a set of glass lamps shaped as rocks, which have been given the capacity of apprehending human touch and communicating with other rocks to express community and closeness. Perhaps you own one rock, and an older relative owns another so that they can sense when you touch your stone, thinking of them. The work offers a chance to think about all those old people who are lonely and in need of human touch.”
Travel and Leisure reported some restaurants may make indoor dining more palatable by installing plexiglass cylinders that hang from the ceiling like lampshades. Diners settle inside the cylinders as they are seated.
Weekly Focus – Think About It
“There will come a time when you believe everything is finished. That will be the beginning.”
--Louis L’Amour, Novelist
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https://www.barrons.com/articles/time-to-build-cash-to-take-advantage-of-stocks-coming-slump-51597451678?mod=hp_LEAD_1 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/08-17-20_Barrons-Its_Time_to_Build_Cash_to_Take_Advantage_of_Stocks_Coming_Slump-Footnote_1.pdf)
https://www.bloombergquint.com/markets/to-the-brink-and-back-in-175-days-the-s-p-500-rallies-to-record (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/08-17-20_Bloomberg-To_Brink_and_Back_in_175_Days-S_and_P_500_Briefly_Tops_Record_Close-Footnote_2.pdf)
https://www.foreignaffairs.com/articles/united-states/2020-08-06/coronavirus-depression-global-economy (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/08-17_20_Foreign_Affairs-The_Pandemic_Depression-Footnote_4.pdf)
https://www.factset.com/hubfs/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_080720A.pdf (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/08-17-20_Factset-Key_Metrics-Footnote_6.pdf)