Once upon a time, about a year ago, the stock market dwarfs were all merrily skipping along, whistling a cheerful tune. They were climbing up the side of Mount Appreciation and they were climbing higher than they ever had before. Conditions were idyllic. The market dwarfs were as happy as could be. Suddenly, they were confronted by a treacherous hobgoblin, the specter of a worldwide COVID pandemic.
We’ll be wrapping up another year over the next eight trading sessions, and 2020 has been quite a present indeed. We were all coping with some of the worst national news in a decade, while our lives and those of our friends, loved ones and coworkers were turned upside down. By the end of March, it looked like it was going to be a bah-humbug year.
Last week’s market action had an odd sort of ring to it. Throughout the week there were overtones of a sucking, sinking sound as market averages wallowed lower. That was interspersed with the occasional whoosh of a rocket blast-off as initial offerings of some high-profile young companies began trading, registering gains of 80% to 100+% on their initial trades. The impressive launches of those new stocks are the market’s way of shouting that the strong bullish mood is still in play.
Stocks floated higher again last week, buoyed by hopes for a brighter future on the promise of COVID vaccines and fiscal stimulus. The market is looking beyond the current rate of record new infections and apparently sees much sweeter times ahead. The frantic pace of the early-November rally, coming into and after the election, has subsided, but the market continues to trend higher. For the second consecutive week,
Last week, the market had to weigh the good news of a second highly effective vaccine against the continuing increase in COVID cases across the country and around the world. So far, it’s a draw. The short-term concerns brought on by record infections have been offset by the longer-term hope for a speedier return to normal. The Dow Jones Industrial Average (DJIA) and the S&P 500 Index (SPX) each ended the week with net losses of less than 1%.
Last week began with news that one of the COVID vaccines in development had proven to be surprisingly effective in trials. We all knew that an effective vaccine would eventually be created; what surprised the market was the trial vaccine’s claimed 90% efficacy rate. Stock index futures rocketed higher in pre-opening trading. All the major indices hit new all-time highs on Monday’s opening. Even the Russell 2000 Index of small cap stocks (RUT) finally exceeded its August 2018 high.
That song is Number 13 on one entity’s list of the 25 funniest country music song titles. Call me lazy or unimaginative, but when I’m at a loss for a title that characterizes recent market action, country music lyrics represent a target-rich environment.
Where the steep market losses in the previous week might have merited Number 21 on the list: “You Done Tore Out My Heart and Stomped That Sucker Flat,” last week the market was in much more of a lovey-dovey mood.
From late-September through early October, the market seemed to be viewing any and all news with rose-colored glasses. The COVID numbers were climbing, but not so bad. The stimulus bill was stalled in Congress, but passage was expected any day. And, money had resumed flowing into the strong momentum stocks. The broad averages were able to recover nearly all of the losses that they suffered through the first few weeks of September.
That title is not meant to be either a political statement or any sort of prediction; it’s just a simple assessment of recent market action. The major averages wavered in relatively narrow ranges through the week despite the horrors of increasing COVID infections, inaction on a new stimulus bill and a second presidential debate. The prevailing attitude of traders seems to expect the potential for significant market volatility in the hours and days following next week’s election.
Many stocks and sectors racked up big gains last week. Many had their best week in months. In a week when four of the five sessions enjoyed gap-up openings, the averages soared steadily and unflinchingly higher, like a jumbo jet climbing after takeoff. Well almost. The ascent hit a nerve-rattling, panic-inducing air pocket on Tuesday afternoon when the averages gave back all of their gains for the week in a tweet-induced,