Those who thought the Stock Market was in a catastrophic free fall last March and decided to bail should have stuck around. Stocks are at an all-time record high of 27,000 in early August.
So, those who figured their 401(k) retirement funds were down the drain are now smiling with relief. Who would have figured that just 120 days ago U.S. equities funds would have bounced back from a 10,000-point downward skid and climbed back, especially during a pandemic that kept everyone off the streets and away from their work places?
Fox Business News Analyst Stuart Varney called this one right. He counseled from the beginning that the market was skittish and volatile for a number of reasons. Varney cautioned that the Democrats were spreading panic, and that panic was spilling over into Wall Street. Democrats complained that the Trump Administration was mishandling the country’s reaction to the pandemic.
To be fair, President Donald Trump’s blithe statements about how everything was under control didn’t help, especially when New York City ran out of ICU beds and protective equipment. But neither did Nancy Pelosi’s appearance at San Francisco’s Chinese New Year festival encouraging everyone to get out and have fun and, she assured here constituents, the virus didn’t originate in China.
So, there’s plenty of political blame to go around. But there are, according to Varney, four important reasons why the stock market stopped its free fall and rose like an American screaming eagle:
1. The U.S. Government has pumped trillions of dollars into the economy. When the new stimulus package finally gets settled, there will be more. Wall Street likes money infusions and increased spending by people who get it.
2. All those big bucks are good for stocks because they stimulate growth. The economy was essentially static and shut down during the spring, but the summer is bringing a rebound — which the market follows closely. News of U.S. manufacturing surges and trade deficit narrowing despite the pandemic is just what the doctor ordered.
3. Speaking of doctors, investors like the news that drug companies are confidently predicting a mass-produced and effective COVID-19 vaccine by the fall. Republicans hope that the combination of slowing virus cases (down by 18% during the past two weeks) and having the vaccine available before election day will swing the election in their favor. Democrats, of course, would prefer the vaccine availability date be any time after November 3.
4. There could be a second wave in the pandemic, which will require everyone to remain vigilant. Don’t expect to get back to “full normal” for years. Nevertheless, throughout the world economies are coming back and rallying. That new expansion has spilled over to Wall Street analysts, who always look to the future.
Whatever the future bring — a negative reaction to the election outcome, for example — no one is forecasting a never-ending rise in stocks. Nevertheless, Varney observes, “what we have now is something extraordinary: record high stock prices in the middle of a pandemic, three months before an election.”
