CHATTANOOGA, Tenn – The election is over, vaccines are on the way, stimulus is coming, and consumers are so eager to get out and spend that they’re blowing off the worst wave of the virus yet. It’s a patently bullish situation, and everyone seems to agree: market participation is soaring and sentiment indicators are at or near the highest levels in history after one of the biggest monthly stock-market rallies ever recorded.
The bear case looks on the brink of oblivion. But it’s not dead yet. To see why, all you have to do is move the goalposts:
The election is over, vaccines are on the way, stimulus is coming, and consumers are so eager to get out and spend that they’re blowing off the worst wave of the virus yet. Market participation is soaring and sentiment indicators are at the highest levels in history after one of the biggest monthly stock-market rallies ever recorded, and the Nasdaq NDAQ +0.3% — drumroll — is exactly where it was three months ago. Throughout all of this, the index has added just 0.4% since its high on Sep. 2.
The S&P 500, which better reflects the powerful rotation underway toward reopening trades, is up 2.4% since then.
My biggest question is, why aren’t stocks higher? Your likely response is, “they will be soon!” The vast majority of strategists will agree, and the breakout in Tesla TSLA +1%, Apple AAPL -0.6% and cloud stocks from potential downtrends suggests another leg higher is indeed the higher-probability event. But if the massive amount of inflows and positive news that we’ve already gotten isn’t enough for the Nasdaq to break out soon, I think the case for a sustained downdraft becomes very compelling again.