Wild Ride So Far in 2020

The S&P 500 just logged one of its worst quarters in history and one of its best quarters in history back-to-back in the first half of 2020.

Specifically, the S&P 500 lost 20% in Q1 while making about 20% in Q2. The only other times in history this has happened were both during the Great Depression (Q3 or 1932 and Q2 of 1938) (Source: @Sentimentrader).

I’ve written about the potential for huge price swings in both directions previously.

This puts the S&P 500 down a little over 3% on the year while the global stock market is down over 7%. Meanwhile, gold and bonds are up on the year.

 

Continue reading “Wild Ride So Far in 2020”

The S&P 500 is More Concentrated Than Ever

The S&P 500 is now more concentrated than ever before with the largest five companies now accounting for over 21% of the entire S&P 500 (by market cap)! Those top five stocks are Microsoft, Apple, Amazon, Alphabet and Facebook.

The concentration recently surpassed the previous record from the year 2000, which amounted to approximately 19%. In 2000, the five largest stocks were Microsoft, GE, Cisco, Intel and Walmart.

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A Light at the End of the Tunnel

First of all, I am very happy to see new data coming in these last few weeks indicating the Virus is far milder than initially believed. Although the World Health Organization initially indicated at least a 3.4% fatality rate, it appears the fatality rate may even end up closer to 0.05% – 0.4% roughly in the range of the flu even without a vaccine in place.

It appears the risk to young, healthy people is negligible while the older population is at greater risk especially if there are certain other pre-existing conditions present. A large portion of deaths, around 50% in some regions, are in nursing home populations. Lockdown policies around the nation should account for these facts and disparities.

We’re also starting to see COVID-19 hospitalizations waning. There were but a few overwhelmed hospitals, the nation has both excess ICU capacity and excess ventilators at this point contrary to the initial projections from the IHME and many States’ Governors’ offices. In fact, many hospitals around the nation are losing millions of dollars and furloughing staff.

In other words, the light at the end of the tunnel is coming into view. The market has been anticipating and rejoicing at this sight evident by the S&P 500’s ~30% rally from the March lows.

What’s Next? Continue reading “A Light at the End of the Tunnel”

NOW It’s An Official Bear Market. Some Thoughts…

It’s official, the U.S. stock market has been in a bear market since it’s all-time closing high on February 19, 2020. Yesterday, the U.S. market had it’s worst day since Black Monday 1987 (market lost over 22% in a single day).

  • This is the fastest retreat to a bear market from an all-time high in history taking just 16 trading days.
  • This ends the bull market that began with the cycle low on March 9, 2009 for an eleven year run and 400% price appreciation. That run makes it both the longest and strongest bull market on record!
  • The S&P 500 is down about 27% from its 2/19/2020 all-time high as of yesterday’s close, which is a level first seen on August 7, 2017 essentially wiping out 2.5 years of appreciation.
  • The market would have to climb over 36% from yesterday’s close to get back to the all-time highs.
  • For contrast, the foreign stock market (MSCI All Cap World Index) has been in a bear market since January 26, 2018 and is only up about 60% from the March 9th, 2009 lows.

Yesterday, sentiment hit EXTREMELY low levels with CNN’s Fear Greed Index at a record low of just 1.

Continue reading “NOW It’s An Official Bear Market. Some Thoughts…”

They Say It’s A Bear Market but It’s Not Really…Yet

Lots of articles out today claiming we are now officially in a bear market, but that’s not really true…at least not yet.

Technically, a bear market is at least a 20% decline from a peak (using closing prices). I’m not a huge fan of that definition since it’s a bit arbitrary, however, it’s widely used so we’ll stick with it to be consistent with the rest of the industry and financial media.

Yes, today, the Dow Jones Industrial Average (DJIA) closed more than 20% lower than it’s all-time high closing price from 2/12/2020. However, the DJIA is only made up of 30 stocks. I have no idea why people are so intent on following the DJIA when it’s a tiny sliver of the U.S. stock universe let alone the global stock universe.

In any case, the S&P 500 still has not technically met the 20% threshold. Neither the global stock market (MSCI All Cap World Index) nor the broader U.S. stock market (Russell 3000) have met that threshold either although all are very close. So, for now, the bull market that began in U.S. stocks back on March 9, 2009 is still in tact.