Published September 10, 2021
It took the S&P 500, a proxy for the U.S. stock market, 354 trading days to double in value from its 2020 bottom. That was the fastest bull market double since WWII. Usually, it takes a bull market 1000 days to reach that milestone, according to CNBC analysis.
What powered the rally? Relief from the pandemic ignited the rally, as people ached to get out, liberate themselves from virus-related constraints (however misplaced) and spend money.
In 2020, the Federal Reserve slashed interest rates to near zero and released $120 billion in emergency bond purchases in response to the fastest drop in S&P 500 history. The federal government also injected trillions of dollars in COVID relief spending into the economy. The response of the Fed and the legislative and executive branches of government primed the pump and overwhelmed the sagging economy.
The resulting massive earnings comeback further fueled the rise. Corporate profits jumped off the pandemic bottom, with S&P companies reporting a 53 percent year-over-year growth in earnings in the first quarter and poised to post a 98 percent surge in the second quarter, according to Refinitiv market data services.
The second quarter of 2021 was characterized by not only a large number of beats but also an impressive magnitude of surprises, said David Kostin, head of equity strategy for Goldman Sachs. For example, the economy added 943,000 jobs in July, above the consensus estimate, but failed to follow through in August.
Can the market continue to move in this direction? Now, the Fed is reevaluating its easy-money policies and weighing whether to raise interest rates. The market has not had a sizable pullback in about 10 months, […]