Market Commentary

Only in the mercurial world of the stock market would good news be greeted with such turbulence.  While the prospects for economic and corporate earnings growth have become much rosier in recent months, this optimism has been accompanied by an increase in long-term interest rates that has created some additional market volatility.

Unlike most amusement parks during the Covid-19 pandemic, Mr. Market’s Wild Ride has remained open for business.  Following the fastest fall in history from a record high to a bear market over the course of February and March, the S&P 500 staged its quickest-ever rebound from a bear market to a new record high, which was reached in August.  The entire whirlwind round trip took place in just 126 trading days.  To put that into perspective, a typical peak-to-peak recovery takes an average of more than 1,500 trading sessions, equivalent to about six years.  The market’s rally is even more striking when set against the backdrop of an economy that is attempting to claw its way back from one of the sharpest recessions in U.S. history stemming from a pandemic that has yet to be contained.

In the world of investing, we are often told to be cautious when we hear market participants use the phrase “this time is different.”  The phrase is often used to justify some excess in the market.  For example, during the Dot-Com bubble of the late 1990s, the phrase was used by investors to justify paying sky-high prices and valuations for money-losing businesses.  Eventually, economic reality returned and left many of these investors holding the bag.