Last week, the Nasdaq Composite Index increased by 1.9 percent.
Bloomberg/Jin Lee
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The Man of Steel, like Superman,
S&P 500 Index
It appears to be unstoppable. Nothing has been able to stop it, not the Federal Reserve, not the Delta variation, not even old-fashioned fear and greed. Of course, it hasn’t yet discovered its Kryptonite. It wasn’t simply that the stock market performed well this week: The
The Dow Jones Industrial Average is a stock market index that measures how well
The Dow Jones Industrial Average climbed 352.51 points, or 1%, to 34,786.35, while the S&P 500 Index climbed 352.51 points, or 1%, to 34,
The Nasdaq Composite Index
The Dow Jones Industrial Average gained 1.9 percent to 14639.33, while the S&P 500 gained 1.7 percent to 4352.34. All three reached new highs this week.
The S&P 500 reached its seventh consecutive high on Friday, the longest streak since 1997. With a gain in June, the index gained for the fifth month in a row, the longest sequence since August 2020. It also increased by 8.2 percent in the second quarter of 2021, marking its fifth consecutive quarterly gain since the fourth quarter of 2017. Its 14.4 percent first-half gain was the biggest since 2019 and the second-largest since 1998. Those figures obviously show strength. The three-quarter winning streak is particularly amazing. The S&P 500 hasn’t only risen for five consecutive quarters. It has risen more than 5% for five consecutive quarters, marking the second time since 1945 that the index has done so. According to Paul Hickey, founder of Bespoke Investment Group, the prior time occurred in 1954, when the Fed was similarly striving to emerge from a period of ultralow interest rates. While the streak came to an end, it did not end in failure. Yes, Time magazine featured the bull market on its cover on January 10, 1955, which was quickly followed by a 6% drop in the S&P 500. The index, on the other hand, concluded the quarter up 1.7 percent and went on to gain 26% in the next year. Five-month winning streaks are less common, but this one was unique in that the index ended the fifth month at an all-time high. According to Sundial Capital Research statistics, this has happened 17 times since 1961, and each time the index was higher one year later. That’s not to say there weren’t some terrible falls along the road. The most recent streaks, which began in 2020 and ended in 2018, were followed by falls of 6.5 percent and 5.4 percent over the next two months, respectively. However, the streaks appear to be a good indicator for long-term investors. “Momentum is a powerful force that doesn’t usually roll over easily,” writes Sundial Capital Research founder Jason Goepfert.
However, it’s not as if the market is risk-free. The June Institute for Supply Management manufacturing survey, which fell short of expectations, did nothing to change the notion that economic growth is slowing and inflation is lurking in the shadows. The minutes from the June FOMC meeting will be released next week, which could provide more evidence on the timing of tapering. Then there’s the Covid-19 Delta variety, which, according to study, may become the dominant strain in the United States in two to three weeks. New cases are already on the rise again—they hit 16,517 on July 1, up 5% in two weeks—and Fundstrat founder Tom Lee warns that the growth might become “parabolic” in 10 to 15 states with low vaccination rates, sparking a temporary stock selloff. “Our central case is that Delta’s ‘transitory panic’ leads July to be ‘flat,’” says Lee.
However, the long-term impact may not be sufficient to substantially harm financial markets. While the Delta variety has occasionally increased the number of cases, the increase in deaths has been minimal, especially in industrialized nations with strong vaccination rates, argues JPMorgan strategist Marko Kolanovic. “This or any other subsequent version of Covid-19 for which current vaccines are efficacious should not drive [market positioning],” he says. So, what is it going to be? We anticipated a drop after the Fed’s aggressive attitude at its June meeting. We were mistaken. Perhaps it’s something we haven’t considered yet? Maybe it’s something that’s right in front of you. Whatever it is, the market is still on the lookout for its Superman. Ben Levisohn can be reached at Ben.Levisohn@barrons.com./n
