Some of you boomers will recognize that as the title of a song by the band Santana from back in the olden days. It struck me as an apt description of how the market sees the coming economic impact of the post-COVID, fiscally reinvigorated economy. In addition to many of the nation’s spenders having already been fully vaccinated, the country has been showered with billions of dollars of free money fiscal stimulus.
The major averages went through a lot of gymnastics on their way through last week, a week that ended with two winning indices balancing a couple losers. Prices alternately leapt higher with the flexibility of an acrobat and then tumbled lower with the grace of a rock. A couple midweek stumbles dropped the averages to what would be their lows of the week by Thursday morning.
For months, the stock market has been expecting and pricing in the prospects for a steep economic rebound driven by effective COVID vaccines and the promise of a fat stimulus package. Those expectations have also factored into an outlook for higher inflation, and along with it, higher interest rates, which in turn has fueled the recent outperformance in value stocks at the expense of growth stocks.
The events of 2020 will leave a mental timestamp in the memories of many people. Years from now, looking back at something that happened in 2020 will likely dredge up a recollection like, “Oh yeah, it happened in THAT year.” Certainly the year produced several indelible memories in the stock market: a steep and vicious bear market, a record recovery and many subsequent new record highs.
I should have kept my mouth shut. I shouldn’t have complained about the dull activity in the stock market in the previous week. I called it a “meh” week, although I did acknowledge the interest rate and commodities markets were much more volatile. That all changed for the stock market last week. Stocks could no longer ignore the size and the steepness of rising interest rates.
The Dow Jones Industrial Average (DJIA) eked out a not-so- inspiring 0.11% gain for the week. That was the good news. The S&P 500 Index (SPX) had a net loss of 0.71% over the course of the week and the NASDAQ Composite Index (COMP) fell a little more than twice as much. I don’t mean to kvetch, but compared to the price action during January,
Investors were likely a little worried as January ended when the last few trading sessions that month saw the market averages drop from record highs to end their worst week in months. Any concern quickly turned to elation as February began with the market’s best week in months. The S&P 500 Index (SPX) and the Dow Jones Industrial Average (DJIA) posted gains every day last week with SPX climbing to new heights on Thursday and Friday.
There was a lot of excitement in the markets last week. The main entertainment for the week was expected to be the big parade of earnings announcements, with not only a large number of reports, but also reports on many of the largest companies. A secondary draw was the Fed policy announcement midweek, though those historically popular events have become yawners lately.
That’s the title of a Rolling Stones album that was released about 51 years ago. It was the band’s second live album, compiled from several East Coast concerts in late-1969. There are many interpretations of the title’s meaning, but the prevailing theme seems to be that it describes unabashed celebration, a sort of uninhibited whooping it up, kinda like the stock market.
Last week, the market was unable to sustain the upward trend it enjoyed through the first week of the year. The averages gave up big chunks of their prior week’s gains, but they’re all still showing modest year-to-date net gains. Both the NASDAQ Composite Index (COMP) and the S&P 500 Index (SPX) lost about 1 ½% for the week while the Dow Jones Industrial Average (DJIA) slipped about 1%.