Market Watch Weekly | May 29th, 2020 | Rocket Man!

Erik Dekker - May 29, 2020
North American benchmarks were higher for yet another week in what is the strongest “bear” market rally in the last 75 years and the sharpest two-month gain for the S&P 500 since 1989.

North American benchmarks were higher for yet another week in what is the strongest “bear” market rally in the last 75 years and the sharpest two-month gain for the S&P 500 since 1989. With such a historic move off the bottom, naturally there has been a lot of chatter on whether the market has rallied “too far, too fast”. To be clear, we do not endeavor to predict or time short-term moves in the market. The greatest investors of our generation will tell you that trying to time the market is impossible. Rather, this rally is based on the future, not the present as optimism around an enduring economic recovery is not misplaced, but should be appropriately calibrated.

The economy and the stock market are seemingly on different pages at the moment, as incoming economic readings reflect the severe downturn while stocks have endured a sharp upturn. While this may feel like a significant disconnect, it is not abnormal. The stock market is forward-looking. The 34% sell-off in February and March reflected uncertainty around the growing pandemic and anticipation of a resulting recession, but in the heat of the market pullback, economic readings were still displaying healthy pre-virus labour-market conditions. Now, stocks have rallied at expectations that have leaped forward to the reopening of the economy and a rebound in GDP and corporate profits.

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