Market edges toward euphoria, despite toll from pandemic
The stock market will not quit.
Already notable for its mostly unstoppable rise this year — despite a pandemic that has killed more than 300,000 people, put millions out of work and shuttered businesses around the country — the market is now tipping into outright euphoria.
Big investors who have been bullish for much of 2020 are finding new causes for confidence in the Federal Reserve’s continued moves to keep markets stable and interest rates low. And individual investors, who have piled into the market this year, are trading stocks at a pace not seen in over a decade, driving a significant part of the market’s upward trajectory.
The S&P 500 index is up nearly 15% for the year. By some measures of stock valuation, the market is nearing levels last seen in 2000, the year the dot-com bubble began to burst. Initial public offerings, when companies issue new shares to the public, are having their busiest year in two decades — even if many of the new companies are unprofitable.
Few expect a replay of the dot-com bust that began in 2000.
But it’s increasingly common to hear market analysts refer to that time when trying to make sense of current market trends.
“We are seeing the kind of craziness that I don’t think has been in existence, certainly not in the U.S., since the internet bubble,” said Ben Inker, head of asset allocation at Boston-based money manager Grantham, Mayo, Van Otterloo. “This is very reminiscent of what went on.”
Although the stock market ended with a small loss this past week, the S&P 500, Dow Jones industrial average and Nasdaq are just shy of record highs.
There are reasons for investors to feel upbeat. The Electoral College voted Dec. 14 to formalize the victory of President-elect Joe Biden, bringing an end to a contentious presidential election that had weighed on markets. A nationwide inoculation push against the coronavirus has begun, signaling the start of an eventual return to normal.
Many market analysts, investors and traders say the good news, while promising, is hardly enough to justify the momentum building in stocks — but they also see no underlying reason for it to stop anytime soon.