Market AGAIN More Precariously Euphoric Than Any Time in History
Market AGAIN More Precariously Euphoric Than Any Time in History by David Haggish for The Great Recession
We are now seeing the most euphoric stock stock market in history — a market as precariously perched as the one I laid out last January. “Market Euphoria Surpasses Dot Com Levels” says one headline.
There is another way of putting it: extreme euphoria.
The sudden hope of multiple vaccines appears to have inoculated the market against an epidemic of bad news that would normally drive markets down.
First, the most stridently contested (and possibly corrupt) election any of us has ever witnessed is the kind of uncertainty markets usually run from. The presumptive victory of the candidate who most promises to raise taxes is also something markets usually don’t like. The rapid resurgence of COVID back to its spring crisis levels is something the market certainly hated when COVID first hit this year and ripped the economy to shreds. The return to full COVID lockdowns in many areas is something the market should fear, having experienced the economic damage wrought by spring’s brief lockdowns and knowing now how longterm that damage can be. These lockdowns could last even longer since we are in the coronavirus’s typical favorite time of year in a season when weeks of indoor holiday festivities could turn out to be “super spreader” events. We shall see.
Meanwhile the approaching end-of-year termination of the numerous economic protective programs that have been put in place and the impending December budget war following with the greatest October deficit in history all seem to be offset by the glinting hope of a $900 billion stimulus program, far smaller than the stimulus programs that failed to pass congress earlier this year. Never mind, however, that all such promises in the past several months have failed.
How upside-down, fat-end-up crazy is it?
Reality has completely departed from Wall Street. While the market dropped in September and October as I thought it would, it only fell to the edge of correction levels (down about 10%) each month and then righted itself both times. Certainly no October surprise.
The real surprise has been in seeing the market take off and soar in its greatest November of all time right after Trump ostensibly lost the election. We remember how it soared when he won in 2016. Well, now it soared even more when by all counts and courts so far, he has lost in 2020.
Much of the post-election rally actually came from people covering their shorts, which they put in during the more tumultuous months of September and October: