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Market Insight

Lessons Learned: Here's Why The Market Is At All Time Highs

It seems hard to believe, but less than a year ago the words “social” and “distancing” were rarely seen together. Last January talks of the market being overvalued were had on crowded subways in New York City, and discussions of an inevitable rise in interest rates were being forecast by credit analysts on crowded Wall Street trading floors. Remember, entering 2020 the S&P 500 (an index of 500 stocks often used to measure “the market”) was in the midst of its longest run ever without a 20% fall. It was a run that lasted nearly 12 years and saw prices rise over 400% since March 2009. So, of course, while stocks have been up 80% of the time over the past 50 years, it was natural for most of Wall Street’s brightest minds to call for a breather after the past decade’s historic, nearly uninterrupted rise.

Quarterly Newsletter

A Look at the Relationship Between the Election, Professional Football and the Stock Market

Financial markets prefer Republican presidents, right? Low taxes, reduced regulations and free markets are central to the Republican economic platform, and seemingly ideal to drive corporate earnings and stock prices higher. Yet, in looking back at the performance of the S&P 500 (“the market”) the results paint a different picture. Since 1926 the market has averaged nearly 15% a year when a Democrat sat in the Oval Office compared with a touch over 9% while a GOP was living in the White House. Even after removing Herbert Hoover from the study (a Republican president during the Great Depression when the market fell over 80%) the market performed better under the Dems.

The Fed has Printed Trillions. Won’t That Cause Inflation?

Which of the following are true? 1) In the past 3 months the National Bureau of Economic Research declared that the U.S. is currently experiencing its worst recession since the Great Depression. 2) In April, unemployment reached its highest level since tracking began in 1948. 3) During the same period that both of the above occurred, the stock market (S&P 500) had its best quarter in more than 20 years. 4)All of the above.

Coronavirus & Capitalism

Just like last time, this time is different. Market movements that usually take a year to make, happen in a week, or even a day. While a new bear market (a decline of 20% or more) was long overdue, the speed in which it occurred was unprecedented, as was the reason. Volatility, though coming down from its March highs, has been historic. Consider, in March the Dow Jones Industrial Average (“the Dow”) had its five worst single day point drops ever, and its four best. With such intense swings, increased media coverage and likely more time to pay attention to the market, thinking about “the long-term” is nearly impossible.

Coronavirus: Another Black Swan

Over the past few weeks financial markets have experienced swings that we have not seen in nearly a decade due to the uncertainty created by the spread of the coronavirus. While the market has been through far more harrowing times throughout history, and especially over the past 20 years, the unpredictability of the virus and the efforts to contain it have markets confused.

What Do Baseball and the Stock Market Have in Common

The league batting average for Major League Baseball was .252 in the 2019 season. This means that a player hit the ball and made it safely to base about once in every four at-bats – 25% of the time. For years, the league wide batting average has hovered around this figure. Last season, less than 2% of players hit .300 or better, with no player better than .335. Some players have great months – like Todd Helton who in May 2000 hit .512 – but eventually all end the full season not too far from .250.