It was a pretty good week for the markets. Just about everything chalked up a gain for the week. Precious metals streaked higher but gave back a bit of their advance on Friday. All eleven U.S. equity sectors were in the plus column for the week. Most international markets, both developed and emerging, extended their recent rallies. Two of the top gainers on the week were sectors that had been at trailing the rest of the field: The Russell 2000 Index of small-cap stocks (RUT) climbed just over 6% and an index of MLP and Infrastructure companies added 6.3%.
Last week the market was like a dance competition where the top prize went to a group in which a half dozen members at the front of the lineup were wowing the crowd while the rest of the troupe was tripping and stumbling behind them. Rallies in a relative handful of the mega-cap tech stocks, before and after their earnings announcements, enabled the NASDAQ Composite Index (COMP) to waltz to a 3.69% gain for the week.
The big story in the markets last week was the continuing rally in precious metals. Gold gained about 5% for the week, and Silver spiked nearly 18%. While media outlets are quick to attribute the rally in precious metals to a flight to safety amid the pandemic, a more accurate description is probably a flight out of paper currency. Following a decade of central bank printing presses running at full speed,
The focus of my article last week was the disparity in performance between the few leading groups and the rest of the market. While the market’s procession higher had slowed considerably in recent weeks, a few groups had continued to parade higher with many lagging sectors bringing up the rear. There also had been a disparity in performance between a relative handful of mega-cap stocks,
The disparity in performance between the few leading groups and the rest of the market widened again last week. While it feels like the averages have been steadily marching higher, it’s been a relatively small group of stocks that have been racking up most of the gains. Most groups have been trading sideways or lower since early-June. Thanks to a big day on Friday,
Just when it looked as though the market could trend endlessly higher with the explicit backing of the Fed, there was suddenly a spike in COVID infections. Just when the potential valuations for social networking and online shopping stocks seemed limitless, there was suddenly concern about the future. It seems more likely that the declines in the market in two of the last three weeks were not a timeout from reality;
The market’s expressway higher took an abrupt detour last week. The averages had motored higher over the previous three weeks, adding significantly to their recovery gains from the March lows, and relegating the February/March sell-off to a just a speck in the rearview mirror. Analysts were declaring a wide-open road ahead as the NASDAQ Composite Index (COMP) crossed above the 10,000 level and reached new record highs.
Last week the market mimicked the previous weekend’s SpaceX launch, rocketing into the stratosphere. It lifted off on the opening bell Monday and never looked back. The second stage fired Friday morning, fueled at least partially by the surprisingly good employment data. The averages, major and minor, all gapped-up sharply that morning and continued higher into midday when they leveled off, apparently having reached a proper orbiting altitude.
I suspect that not very many people care too much about what I have to say about the stock market this week. Sadly, that may be true a lot of the time, but this week in particular the country has new concerns and worries that have suddenly compounded the dislocations caused by the COVID contagion. It’s not so much the weekend’s demonstrations themselves that are a concern,
For the past five weeks, the big question for the market has been whether the impressive rally from late-March into late-April was the beginning of a new bull market or just a rebound rally in a continuing downtrend. The rally extended far enough to convince many that the lows had been seen, but it failed to climb far enough to invalidate the continuing bear market theory.