Wednesday's gain left the Dow Jones today, on the last day of April, sitting on its best month of the century. Actually, it's the century's best month for the Dow, the Nasdaq and the S&P 500.So strange... in this lockdown month.
In fact, the Dow's 12.4% advance so far in April puts it on track for its best month since a 14.2% surge in January 1975. That's a 45-year record. The Nasdaq is toiling away at its biggest monthly advance since February 2000. That was a 19.2% spike, preceded by a 22% Santa Claus rally in December 1999. The S&P 500 has rebounded 13.7% in April. That beats everything going back to its 16.3% rebound rally in October 1974.
April 30, 2020
"Can The Dow Jones Today Nail Its Best Month In 45 Years?"
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Context defines everything.
Not strange. Markets are forward looking. Millions of deaths and overflowing hospitals were priced in but didn’t happen. Virus is now on the decline. Interest rates are zero and stimulus taps are wide open. However, economy will soon have to show signs of life for the rally to continue.
The market is aware that there is no structural or systemic issue with the economy. It has been shut down, it has not collapsed due to the usual suspects (over-supply, bad monetary policy, sudden paradigm shift, etc.). Add in that everyone expected a correction at some point anyhow and you get a market that has shed its "irrational exuberance" and is looking to the future and choosing to believe the economy will bounce back once it is permitted to.
Let the GND proponents get their way and watch the market plummet.
Bushman of the Kohlrabi said...
Not strange. Markets are forward looking. Millions of deaths and overflowing hospitals were priced in but didn’t happen. Virus is now on the decline. Interest rates are zero and stimulus taps are wide open. However, economy will soon have to show signs of life for the rally to continue.
This. And it's worth remembering the companies that are publicly traded are usually larger concerns and have the financial resources to combat a downturn. And now these companies are in a landscape in which the government has strangled some of their smaller competitors.
I dont have an IBD account so I wasnt able to look into whether most of the gains were from 4 tech stocks (Apple, MS, FB, Tesla?), as suggested. Just gives me the depressing feeling that there is lots of money floating around that might be put to more productive uses. I know, I am financially/economically ignorant.
I asked my Magic 8 Ball five times and this is what I got:
● Reply hazy, try again.
● Ask again later.
● Better not tell you now.
● Cannot predict now.
● Concentrate and ask again.
Everyone who could got out of the market in February and March. Now they are buying back in for the run up which won’t get back to the previous high until next winter at the earliest.
The stock market often looks through the valley. Yeah, things are bad. In fact, they are so bad that they can only get better. I better buy.
This phenomenon also appears in the other direction: good news is bad news. Yeah, this is good news. But how much better can things get? I better sell.
Once it became clear that the viral pandemic was oversold, and that folks would soon be getting back to work, the market rebounded.
This, of course, is pure speculation on my part, because it is mostly folly to try to explain the ups and downs of the market.
However, since its nadir on or about March 24 or so, it's gone up, so I am happy.
I will be real happy when our idiot California Governor Newsom reopens the state, so that blue collar folks can return to work. Also my dog needs some serious grooming.
Also, we got the correction that everyone has been waiting for.
The market is betting on a V-shaped recovery. I hope the market is right, but I don't really believe it. People keep repeating the meme that no structural damage has been done to the economy- it was just shut down for 6 weeks, and all the factories and businesses are still there and can be reopened. I am always gobsmacked by this belief- there was no structural damage in the 2008-2009 recession either- in fact, there was far less damage of any kind in 2008-2009- it isn't like a giant tornado destroyed the economy that year.
Over 30 million people have lost their jobs in the last 6 weeks- that is 20% of the work force, and these are just the people who filed for unemployment insurance, so the job losses are even higher. Even if the entire country reopened tomorrow, at least 20 million of those won't be getting their jobs back in the next month, and this assuming the job losses don't continue after the reopening at a rate of a million/week. You add in the people "working" from home and/or just on paid vacation, then you have the product of another 20-30% of the labor force simply not being produced at all.
It will be a long slog to just reach the state of real output that existed just in February. I doubt you see sub 10% unemployment before next Spring.
Like I wrote, though- I am praying I am wrong.
Let's assume a hypothetical index is at 1000 points...
In one month, it drops 50%; a drop of 500 points, to 500...
The next month, it RISES 50%; a gain of 250 points, to 750...
WOW! what a SPECTACULAR one month rise!!
We went down 50%, but the next month we went back up 50%!!
or was it a two month drop, of 25%
What i'm saying is: going up a percentage is ALWAYS smaller than going down that percentage
I remember posting here when I rolled my position from TVIX to SDS and recommended people get similarly short. That recommendation wasn't received well here.
I didn't participate in the rally other than going long a single equity, in size. You can guess who.
I wouldn't touch this rally. When I'm ready to go short again I'll mention it. Might be wrong of course, often am.
Most know that the COVID-19 response was excessive.
A virtual economy full of virtual people... persons. The "essential" services were exempted.
@Yancey Ward,
All good points. The GDP 4.8% decline in 1Q would ordinarily be horrible, and get the President fired. Yet, a lotta folks thought it would be much worse -- due to all the hysterical headlines and virus propaganda. It is bad, but not fatal. 2Q GDP will be better.
Half the country is beginning to reopen, lead by Texas and Florida. Of course, NY and Cal will continue to slow-walk it, because they are leftwing assholes. But the jig is up. The viral Emperor has lost his clothes. People who can work, want to return to work.
Let them work!
I admit to being a short-term skeptic. The market is acting as if we have the virus beat and a vaccine already exists. The second quarter numbers (April-June) will be worse than the worst quarter during the 2008-2009 crisis. The economic shock will likely continue for the rest of 2020 as rehiring will be slower than the firing/furloughing (think Tony Evers' "turning a dial" rather than flipping on the switch). The impact will last years for some sectors.
That said, we are still 75% invested in equities, and there are some tech companies that will benefit from this. We have a 15-20 year time horizon, so this will be long past history whenever we need to access or rely on invested funds.
Great for those of us who went buying in March.
I had procrastinated in getting some cash I had in savings into stocks. The drop in March signaled "Buying time" for me and was a kick in the butt to get it done finally. Since I was buying for the long term, I was comfortable, as the market would rebound eventually. I just never expected how quickly things would start turning around.
“Over 30 million people have lost their jobs in the last 6 weeks”
Presumably you’re using the unemployment claim numbers for this statement and the 30 million is very misleading. Large numbers of those people haven’t lost their jobs and are, in fact, still working. Albeit at reduced hours, hence the unemployment claim. Large numbers on standby as well, so not truly unemployed but not clocking hours, either.
Talking about the Stock market is a bore - unless it something like Oct. 1929. It goes up, it goes down. Over the long run, it goes up. Mostly. People have opinions, but if they knew where the stock market was going, they'd be talking with their broker and making millions, not chit-chatting on the internet.
"Talking about the Stock market is a bore - unless it something like Oct. 1929. It goes up, it goes down. Over the long run, it goes up."
True. I prefer the employment numbers to go up and stay up. It's better for the country.
No, Cracker, they are largely unemployed if they are filing for UE- they might not be officially laid off given the changes in the rules, but they aren't really working either. My sister is in this boat- she is an occupational therapist, and while she hasn't been officially laid off, her hours were cut back to almost nothing- not even a day's work/week since late March. So, maybe 30 million multiplied by some factor like 0.8.
No, the stock market probably can’t set the new record today, as is almost always the answer to headings that end with a question mark.
"So strange... in this lockdown month."
Not so strange, as a bet on the future's being much more like what January looked like than what April looks like. So, if you're an investor, place your bets and see how it turns out. PS: if anyone tells you they have a model that predicts what life and the markets will be like in a year, ignore them and consider doing the opposite. Same with the election -- Biden ahead in the current polls, Trump ahead in the betting markets.
Here is the problem, Bay Area Guy- that minus 4.9% yearly drop in Q1 was just January, February, and March- the real problems in the economy didn't even start until March 13- that 4.9% drop was almost entirely due to the last 2 weeks in March. You will have that effect for the entire month of April, most May, and probably June, too. Q2 GDP is likely to drop at a -15-20% annualized rate- probably more. That number won't be reported, though, until the last week of July. Q3 won't be reported until the last week of October- just before the election. These are huge calender events now with massive political ramifications.
Yes, the market is forward looking. But as others have pointed out, there are a handful of tech giants who are driving a lot of this rally. Also we have gotten really effective at inflating asset prices and keeping them inflated through monetary and fiscal manipulation.
Bear seems to be taking his prey one at a time.
If the DOW were still around 18-20K right now, I would be tempted to put on a large straddle option position (you profit from any big move in either direction), but at 24K, I don't see a lot of upside left even with really good news on the economic front, so a straddle seems to only offer a profit on a big downside move from here.
I had put in about 15% of my investment portfolio into stocks 5% at a time during the rout in March, but when the DOW recovered to 21,500, I booked the profit completely because the ascent was simply steep given the news at the time- I left money on the table, but the 20% profit in two weeks time was significant money given present circumstances. I still think I will get a better entry point than mid March had, but I do have increasing doubts about that now given how mild the virus turned out to be everywhere but the Northeast.
What I did do 3 weeks ago was sell a lot of out of the money puts for stocks I would like to own at those particular strikes. They all expire between July and October, and right now I predict they will all expire unexercised. I will probably do nothing until at least September.
“My sister is in this boat- she is an occupational therapist, and while she hasn't been officially laid off, her hours were cut back to almost nothing- not even a day's work/week since late March. So, maybe 30 million multiplied by some factor like 0.8.”
Well, if we’re doing anecdotes, there are 450 regularly full-time employees in my company who are all working 20 hours per week. 95% have filed unemployment claims. So, certainly not unemployed, but counted as such.
Ah no wonder. I bought all the way down, and now my funds are inflating like a big balloon.
Muh portfolio! Life is good.
@Yancey Ward,
Yeah, you totally may be right. I have both made and lost a ton in the market over the years, guessing on this and that. I should be playing roulette!!!
In my mind, though, the two pressures pushing the market up are: (1) reopening (still 50% of the country to go) and (2) that vague concept of "stability", i.e, recognizing that we're not all gonna die from the Chinese Bat Flu and that by summer, we can basically return to normal.
One of the reasons, Governors Gavin and Fredo's brother are reluctant to reopen is because they understand it will unleash a flood of good news inuring to the benefit of one DJT.
But the biggest count against stocks is that they reached the most overvalued levels in our financial history back in Jan-Feb. One month, even down 30%, seems far too brief and far too little to have corrected the most extreme levels ever.
All this is nonsense. Once many stocks were decoupled from dividends, it became a form of gambling. And you have big players who trash the market at its height (after selling, of course), so they could pick up stocks at lower prices.
It's churn, all the way, and if you try competing with the big boys, you're chum.
The stock market is a good signal of how the economy is doing under normal circumstances. When circumstances are not normal, you quickly discover who is overextended, who does not really know what he or she is doing, who is very prone to panic, who is a month away from retirement or so he or she thought, who got really bad information, etc. Once all those people either calm down or get wiped out and more time passes to gain a better understanding of what the situation actually is, the market gets back to "normal."
To apply to the current situation, the danger of COVID-19 and the danger to the economy were not well understood - we knew little about the disease and quarantine shutdowns are not something anyone has experienced - and so you got full blown panic. When it became apparent that the disease is not as bad as original advertised, the government after some initial stumbling on the whole was handling it well, and that we would be opening up sooner rather than later, the market adjusted from "catastrophe" to "large speed bump."
My investment firm sold equities at the peak and bought when the Dow hit 19,000.
I really have not been financially hurt much by the Wu Flu pandemic, nor have Althouse, Meade and others who are retired and financially responsible.
In defense of the market and its forward looking stance being the reason for this recovery, there is this: the bulk of new money going into the market over the last decade has gone into passive vehicles like ETFs. They trade automatically on the basis of fairly simple algorithms so that they can track their respective index. So yes, some smart money may start selling an asset or entire asset class in anticipation of leaner times ahead, but that quickly snowballs into a very steep decline as it triggers the enormous passive investment vehicles to rebalance their holdings, which in turns spooks people who sell what they can to get money out of the market, which further steepens the decline. Then there's all those people who were short volatility, a popular investment strategy of the last decade that also contributes to this "zombie market" phenomenon along with the enormous passive ownership of shares. By this hypothesis, the reason why things went down so far, and then back up to where we are so quickly, is because we're now past the zombie market phase and are actually seeing the market reflect the discount on asset prices related to reduced economic activity. I think that has some legs, but I also think we've gotten so good at inflating asset prices that it's hard to trust the forward looking market right now given all the bail-out and stimulus cash that we know supports higher asset prices.
For those sitting on gains and wondering how to protect them without using conventional hedges (which don't work so well in unconventional times), here's a nice article on tail-risk hedging, which is like buying insurance for your portfolio using either deep out of the money put options or a long volatility strategy. Both approaches are a lot more expensive now than they were in February, however such an approach--where 2-5% of the portfolio holds these highly convex positions--would have allowed one to keep their long equity positions throughout, and still come out way ahead. It is complicated and a bit pricey for retail investors to devise an implement such a strategy vs. using money managers who operate at scale, but it is possible. In terms of hedge funds using such a strategy, Universa Investments, Nassim Taleb's hedge fund for tail risk hedging, returned 3600% in March. That's the kind of position that loses money, hopefully relatively slowly, over a long period of time and then delivers highly convex returns when things get really bad (e.g. declines of > 10%).
Stocks are fairly priced within 10% either way of current levels. I expect them to waltz around with some exciting moves each way.
The only real repricing event over the next year is the election. As this nonsense recedes, it will become clear what’s at stake. Green New Deal? Making America into a social democracy like our European friends? Is our bias towards enterprise or safety?
Individuals are pretty consistent in their outlooks. Politicians like Whitmer and Pritzker play on people’s concerns about safety. Pelosi/Schumer and Trump/McConnell are playing a power game, with their biases in a secondary, supporting role. What they really want to do is kill their opponents. Biden is in a semi- vegetative state, but at best he is the school mascot trying to get elected homecoming king. He’ll be retired before the election.
So, welcome to the rest of the year.
Bill Peschel— I have been buying only stocks that pay dividends for 25 years. It has worked out well. I have 10% of my funds at William Blair with a mandate to invest in a portfolio of well managed growth companies regardless of dividends.
Morningstar publishes a dividend investor newsletter. I also pick from the S&P dividend aristocrats list.
And you have big players who trash the market at its height (after selling, of course), so they could pick up stocks at lower prices.
It's churn, all the way, [Bill Peschel]
Bill, how can you say such a thing? Why, look at Tesla. Yesterday TSLA was trading in the 790s. After the close, company reported a better-than-expected quarter. The stock went to 886 in the after-hours, up over 10%. And it still managed to open in the 850s today.
OK, so it's 778 as I write this afternoon. Fundamentals, man!
Trump makes deals.
With anybody; with everybody he can. With EU, N. Korea, Japan, China;
with Pelosi & Schumer.
With people who hate him.
Lots of Trump-haters are rich, and want their companies to do well -- and the deal Trump supports is to send billions in checks to voters, and billions in checks to the rich.
What else are the rich gonna do with their "stimulus" cash?
Invest in new, untested, likely to fail companies?
Yeah, some.
Invest is Blue Chips?
Yep - a LOT more.
Invest in affordable housing for working class ...?
I don't think so.
Trump's deal for the Dems:
EVERYBODY gets more cash (except, maybe, future taxpayers...).
It's a deal almost no politicians can refuse! (Libertarians could - but they're hardly "real politicians")
What are the rich gonna buy more of?
""Can The Dow Jones Today Nail Its Best Month In 45 Years?""
The DOW Jones is 30ish handpicked companies. They are added and dropped on whim.
It is a truly stupid barometer for the economy.
The market is a dead man walking -- you read it here first.
And, as if on cue, the market is heading south today! Thanks, Professor!
I have been surprised at how well the market has held up over the last month. I suspect that the news that the virus had peaked in April was a contributing factor: things would start to get better/the worst was behind us. We don't yet know the economic impact and I suspect that we'll see another significant market downturn in May as the results are realized. The imposition of further lockdown orders will absolutely be a factor. Economic activity that could be initiated will be artificially suppressed.
@Bushman
Virus is now on the decline.
In what alternate universe? Cases and deaths are still increasing at roughly the peak rate, and that is with all of the social distancing measures of the past month. I don't see the rate of increase going down if we ease up.
I bought about 10K in Bitcoin around the time the market crashed. It's currently up over 100%. Can't beat that return.
I'm still in stocks, and will be for the long run, but the amount of money the Fed is giving out is concerning. Gotta put your money somewhere other than the bank.
n fact, there was far less damage of any kind in 2008-2009- it isn't like a giant tornado destroyed the economy that year.
Oh but there was!
There were lots of stripperswith 5 houses and a condo on bogus documentation.
Building those houses and condos was the damage. Bigger than any tornado. A lot of the houses that were unfinished were torn down eventually, unfinished. At significant cost.
The damage was just hidden in excel spreadsheets and only visible in the media by Lehman Brothers leaving their office with only their boxes of stuff from their desks.
Might this just be a dead cat bounce where the cat was thrown off the top of Mount Everest and Landed in Death Valley on a trampoline.
Lockdown almost over. Things will pick up over the summer to where it was before the virus scare. Expect by summer Dow goes to 28,000 or more. Might even break 30,000!
So.. if you have any brains... invest!! Carefully invest, but do invest.
It's called.. by low, sell high.
For anyone who has looked at a plot of the DJIA for the past 6 months, do you really see this as newsworthy? If a man falls in a well and climbs out- look at the fantastic change in elevation he has had!
I am glad that the financial markets are doing well, since that represents optimism on behalf of those putting their money where their mouth is. But I don’t care whether this was the best month for some index since 1974, 1987, or whenever.
@Howard, I think you are absolutely right. You better sell any remaining stocks you still own, and quickly!
The Market knows the China Virus was either a scam or is no longer the threat it once was. The Markets also know that President Trump is pro-business and pro-American workers so things will correct much more quickly than if a Demtard freedom, market, American worker hating person was in charge.
It took 3 trillion dollars of Federal Reserve Bank "liquidity" to move the market halfway back to where it was.
rcocean said...Talking about the Stock market is a bore - unless it something like Oct. 1929. It goes up, it goes down. Over the long run, it goes up. Mostly. People have opinions, but if they knew where the stock market was going, they'd be talking with their broker and making millions, not chit-chatting on the internet.
RC, who uses a broker any more? With the internet for business news, online research tools, and online trading, there is no reason to bring a middle-man into the process. Over the last 20 years I have created a dividend juggernaut loaded with dividend aristocrats that makes my retirement possible. And I rarely ever talk about the market as a whole. There are many U.S. industries in shambles right now if they are tied to restaurants, travel or non-essential healthcare, etc.
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