THE NEUTRAL ZONE
As of Tuesday, the Nasdaq officially made a return to a positive on the year, while the Dow Jones Industrial Average and S&P 500 are nearing the green. With this uplifting news for investors, some question if the market has fully recovered and exited the bear market. The surge comes on optimism from the United States economy reopening with a return to normal. Even while the market was down on the year, many analysts predicted a “V-shaped recovery” due to companies recovering and performing higher than expected. The airline industry has bolstered such optimism, largely due to analysts raising their price targets as airlines set new guidelines and precautions to make flying during the pandemic safer.
However, as the U.S. nears YTD highs, some question if the market really is back to normal. Some analysts predict another dip to the stock market leading to a “W-shaped recovery.” The reasoning comes from the economy taking a different path than the stock market, leading investors to skepticism about the optimistic view of the market. With this analysis, researchers believe the reopening of the United States could lead to a second wave of outbreaks that would shutter stores and restaurants once more.
The stock market is unhinged from our recession reality. Why that’s dangerous. – NBC News – 6/8/2020. If the current market frenzy is the result of a certain narrative, then the rally could evaporate if enough investors decide the story no longer makes sense. That could happen at any moment as the stock market glow fades under closer examination: Investors aren’t spreading their cash broadly but are mostly piling it into stocks of companies that appeared certain to thrive during the coronavirus crisis and after, such as dominant technology companies like Amazon and pharmaceutical firms.
The stock market’s breathtaking rally has some investors worried about another correction – Fortune – 6/9/2020. The stock market continued one of the more extraordinary rallies in recent memory on Monday, with the major indices gaining further steam less than two months after one of the most precipitous sell-offs in history.
Investors boosted their stock-market bets in May for the first time in 4 months, TD Ameritrade says – Business Insider – 6/9/2020. TD Ameritrade clients increased their exposure to the stock market for the first time in four months, a May update to the firm’s Investor Movement Index showed Monday.
Bull, bear, bull, bear and now a new bull market — here’s what’s next, strategist says – MarketWatch – 6/9/2020. The short-term path of U.S. equities is unclear but the S&P 500 should move to new highs on a 12-month basis led by cyclical stocks beaten in the coronavirus downturn, BTIG strategists said the upward momentum of equities continued at the start of the week with the Dow Jones Industrial Average climbing 1.7% on Monday and the Nasdaq reaching a new all-time closing record.
- Donald J. Trump on Twitter 6/8/2020: Big day for Stock Market. Smart money, and the World, know that we are heading in the right direction. Jobs coming back FAST. Next year will be our greatest ever!
- jeroen blokland on Twitter 6/8/2020: #NewZealand’s stock market is now up for the year after the country succeeded in eradicating the #COVID19 virus. As of today, all #SocialDistancing measures are lifted.
- CNBC on Twitter 6/8/2020: ‘Where are the sellers?’ Cramer worries about stock market getting too far ahead of the economy
- maxwell on Twitter 6/8/2020: the stock market isn’t the economy—of course—but it is extremely alarming that corporate america appears prepared to move forward without a huge swath of the american labor force