Following months of efforts during 2020 to regain previous highs, 2021 has flipped the page and made new all-time highs in the US equity markets. Can the trend continue, or has it been too much, too fast?
As we move into summer it’s a good time to review where markets are following 2021’s furthering of the equity market rebound that began in 2020. The yearly experience of the capital markets can often be loosely generalized as three phases: January through May, Memorial Day to Labor Day and Fall/Winter. As we consider what lies ahead, reviewing where the various markets stand entering the summer months can be insightful. And context is critical.
Is it a “stock market” or a “market of stocks”? And does it matter? Through the years the capital markets have exhibited eras defined by various behaviors and characteristics. These can be both interesting and, more importantly, helpful in deciphering where opportunities may lie. This old question of a “stock market” or “market of stocks” provides interesting context for today’s equity markets.
Buy the rumor, sell the news”. Like many popular sayings that persist overtime, this one is also hard to prove true or wrong.
When markets rise rapidly, investors typically break into two groups: the “momentum will continue” group versus the “too much, too fast” group. And following 2020’s event-driven hit to the global economy, a disruption unlike anything we have seen during this era, it’s an especially difficult environment for assessing the future. If the cause was unprecedented, will the rules apply to the response?
It’s been talked about. Investors had thought it would happen in prior months. And now it looks to have arrived. The much anticipated return of Value stocks, as they appear to finally be taking on market leadership. Not to get ahead of ourselves, but this chart of the ratio of US Growth stocks versus US Value stocks looks ready to break out from months of transition to a position of Value leadership.
When markets rise rapidly, investors typically break into two groups: the “momentum will continue” group versus the “too much, too fast” group. And following 2020’s event-driven hit to the global economy, a disruption unlike anything we have seen during this era, it’s an especially difficult environment for assessing the future. If the cause was unprecedented, will the rules apply to the response?
Moving on to 2021: are there new questions? Or more of the same? Can equity markets continue the trend? Will interest rates remain historically low? Could gold share its safe-haven status with Bitcoin? (Never thought I would write that sentence!)
Moving on to 2021: are there new questions? Or more of the same? Can equity markets continue the trend? Will interest rates remain historically low? Could gold share its safe-haven status with Bitcoin? (Never thought I would write that sentence!)
The long-standing axiom that “markets lead the economy” sums up the unprecedented rebound in 2020. Or at least the markets think so. In the midst of health concerns, economic uncertainty, political turmoil (oh, and Brexit is back in the headlines), equity markets continue to march forward, or at a minimum, hold their ground. Has anyone told them how much disruption and risk is out there?