The S&P 500 is close to records.
The big average closed on Tuesday after Russian President Vladimir Putin said his country had registered the first coronavirus vaccine in the world. While there is skepticism about the vaccine, and especially its long-term effects and safety, the announcement helped lift investor sentiment.
The S&P is now almost 4.5% up from year to date and almost 46.5% of the March 23 lows.
Kathryn Rooney Vera, chief research and chief market strategist at Bulltick Capital Markets, attributed the moves largely to encouraging the government:
“If we do not get extra fiscal incentives, then I think it’s going to be ugly for the markets that come forward. Let’s face it: we are … very close to record highs of all time, and the main driver of that appreciation in the S&P 500 there has been stimulus, both fiscal and monetary …. The combination of variables we currently have is very happy for the markets, and that’s why they continue to move, mainly driven by retail investors. … An article by Barron came out very recently saying that 25% of recent market movements are brought in by retail investors.What I think is the Bullish case here is the potential for a real fax.Maybe it’s not the Russian but potentially for a real vaccine over the next six months.If that is the case, then we have the fundamental basis, which is that the forthcoming growth in U.S. consumption is solid, and if that happens, then this V -shaped recovery that we’ve seen so far, really donated … what we need to see is something [retraction] of the fiscal stimulus, because, from what we see now, the Lehman Brothers reaction seems to be making children play. We are talking about trillions and trillions of extra fiscal stimuli in the market which is already at record levels with consumption already growing, increased by a Federal Reserve which is really dramatically increasing its balance sheet. “
Sam Stovall, CFRA’s Chief Investment Officer of the US Stock Strategy, reaffirmed the strength of the market to optimism around advances in vaccines and the possibility of additional incentives:
“I think it’s not specifically focused on the Russian virus information, but rather the implication that the whole world is getting closer to one kind of vaccine, some kind of a cocktail. … That, it’s actually just, I think, enthusiasm that we are progressing from a health care perspective … And I believe there will be an incentive package, but I think that because of the disagreement that has been going on so far, that implies that we will probably not get any extra package on top of this. “I think we’re seeing a bit of a rally in anticipation of one last passage.”
Goldman Sachs’ chief US action strategist, David Kostin, found it worthwhile to focus on long-term growth:
“The positive expectations on the medical front have certainly been one reason for expectations that economic activity is likely to rise. In Goldman Sachs’ economic forecast for next year, average annual growth for the US economy [is] around 6.2%. At present, consensus is around 3.9%. That, it is certainly a more optimistic view than many people have at the level of business activity for next year. That translates from a stock market perspective into better growth. So, the question then is how should portfolio managers position themselves in that kind of background? And the idea of better growth still lies with technology. That … in terms of the day-to-day rotation we may have seen today as the last few days, I think maybe the fundamental problem is missing that rates, interest rates are likely to remain extremely low. … But the idea of better long-term growth is what characterizes technological advancement more than anything else and the longer term, the better long-term growth, is more valuable, is more valued, in an environment of low rates. So, that’s the story, if you will, behind the tech argument. That’s what I would suggest about why focus on long-term growth. “
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