We have seen lots of ups and downs (mostly downs) since mid-February, but with three straight days of positive finishes in the market, it’s time to explore whether this means we are in for a bull market again.
While this was based on the Senate passing their stimulus bill, record jobless claims, and coronavirus cases swelling, the question is starting to become what does this actually mean?
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Who Were the Big Movers?
It seems like nearly every industry did well today, but there were a handful of companies that really led the way.
The first and one of the most surprising companies to dominate the market today was Boeing (BA). Boeing makes airplanes and the industry has taken a beating over the past few weeks, so why did it have such a great day? Well, in addition to other market news, Boeing is potentially receiving a bailout from the government, which instilled some more confidence in investors.
Peloton Interactive Inc. (PTON) also had a great day, and at least one expert said that the company is benefiting from people being stuck inside–thus they’re buying and using their Peloton home workout systems.
Slack Technologies Inc. (WORK), makers of the popular messaging app Slack, saw their shares rise greatly as well, benefiting from more than 12 million active users online at once yesterday–since so many companies are working from home, systems like this are adding a ton of value in communication.
Obviously, plenty of other companies had great days on Thursday, but those were three that really stuck out to me as a direct result of what is happening right now with this pandemic.
Is This a Real Bull Market?
There’s a big split on this. Many experts are saying that this is an excellent time to buy but many are still cautious. First, let’s clarify what we mean by a “bull market.” A bull market means prices are rising and people are buying, but it’s typically supported by a 20% gain or more–which we have already seen this week.
The problem is that those gains have come in a really short window of time, which has some people thinking we’re on a fast upswing and others getting nervous that it’s not real.
This is Happening Way Too Quickly
For example, Randy Frederick, vice president of Trading and Derivatives at the Schwab Center for Financial Research said in an interview with Business Insider that a bear market turning back into a bull one “has never happened that quickly,” and “If it does indeed end with this rally that we’re seeing right now, it will absolutely be the shortest bear market in history.”
That’s super concerning when you read between the lines. Technically we’re in a bull market right now, but if it’s real, it’ll be the shortest bear market we have ever seen. Meaning, this type of meteoric rise is unprecedented, which should cause a little concern.
But Doesn’t the Market Follow the Economy?
But you might wonder how this could all make sense. A skyrocketing stock market in the midst of massive unemployment statistics and a global pandemic. Well, as Randy Frederick also stated in a separate interview, “the markets and the economy don’t run in parallel. The market’s running way ahead of the economy … The markets don’t care about what’s happening today, the market cares about what’s happening six months from now.”
So does that mean the market is forecasting things turning around in about six months? Possibly, but there’s no real way to know that. We still don’t even have a vaccine for coronavirus, and the stimulus bill has just barely been approved. So it could just be wishful or hopeful thinking by the market.
In fact, CNBC also stated that “economists are expecting a steep fall for the economy in the second quarter that could exceed a 20% GDP decline, with some 10 million people out of work and an unemployment rate higher than anything the U.S. has ever seen.”
So is this Real or Not?
As frustrating as it is, we don’t know. You’re seeing some of the smartest people on Wall Street make claims in both directions, so it can really go either way. Yes, technically we are in a bull market, but it happened incredibly quickly and it’s doing so at a time when the United States now has the highest amount of confirmed COVID-19 cases and a record number of people are applying for unemployment.
The silver lining is that the government, through fiscal policy, is helping those who are unemployed through the stimulus bill, which will extend the time period by which you can get unemployment as well as give some extra money. But the markets are moving in the wrong direction, it seems (meaning, stocks are going up when it seems the economy is moving further toward a recession).
What you should be doing right now is paying close attention to the markets. I don’t recommend day-trading, as I think it’s just a gambling game. I am a long-term investor and would suggest you think long as well.
The only people that should really be taking note are those who are close to, or already in, retirement. If you’re in this category I wouldn’t panic, but I would watch the market closely and be sure to make sound decisions on what to buy and sell.
Everyone else should be taking a long-term focus and staying the course. With that said, I do agree that there are some bargains out there, and you could find some great stocks at excellent prices. But that’s if you’re someone who looks to buy individual stocks.
The other option is to just pump extra money into a robo advisor like Wealthfront and get an instantly-diversified portfolio that will stay in line with the market. Meaning, you’ll get a lot bang for your buck right now, once the market eventually corrects itself.