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Wall Street’s most-followed index S&P 500 continues its fourth straight week of rally hitting new record highs on Tuesday. While the stock market surges, analysts remain divided over signs of economic improvement.
In one of the fastest recoveries of the stock markets, the S&P 500 index hit its new record high on Tuesday, August 18. On Tuesday, the index closed 0.23% up at 3389.78 levels. This has been one of the fastest recoveries ever in the index’s history after it crashed more than 30% during March 2020 on the outbreak of COVID-19 pandemic.
The U.S. stock market was soaring high in early 2020 hitting new record levels by mid-February. Just when everything was going right, the Coronavirus outbreak plunged the market indices by nearly 40%. The S&P 500 crashed over 35% in the same period hitting its 2020-low at 2273 levels on March 23.
Since then, the S&P 500 (INDEXSP: .INX) has gained over 55% to hit a new record high on Tuesday. Wall Street’s most-followed index made new highs supported by a massive rally in the tech space. Besides, trillions of dollars in fiscal stimulus has also kept the markets going higher. With a recovery just within 6 months of its crash, this has been S&P’s shortest bear market in history.
However, the COVID-9 pandemic woes are still far from away. The global coronavirus cases have crossed 22 million with the U.S. being the worst affected with 5.6 million cases. However, it seems as if investors have brushed aside all the worries and looking a path forward for an economic recovery.
Sectors like aviation, hospitality, travel, etc are deep in water. On the other hand, tech sectors, e-commerce, and retail continue to thrive as more people stay at home. Also, the stellar results by giants like Amazon.com Inc (NASDAQ: AMZN) and Walmart Inc (NYSE: WMT) show that the consumption story remains strong.
Analysts Remain Divided Over Signs of Economic Improvement: Is New S&P 500 Record High Possible?
The uncertain moments continue to cast a shadow over the global economy at this stage. While the market record highs, doubts on the underlying health of the economy still continue to persist. Speaking to Reuters, Patrick Leary, chief market strategist at Incapital, said:
“The S&P 500 has been impressive and has created a lot of wealth, but I am not sure that reflects the overall health of the economy. The rally has more to do with asset inflation, which is fueled by all the liquidity and all the continued support in the economy as well as the weakening dollar.”
Also, in an economy suffering from a record slowdown, the housing sector in the U.S. continues to remain strong. The latest data shows that the U.S. homebuilding has accelerated, by far, the most in nearly four years. In a note to clients, Chris Rupkey, chief financial economist for MUFG Union Bank in New York, wrote:
“One of the economy’s most important leading indicators is telling us that not only is the pandemic recession over, the economic outlook is actually growing brighter by the day.”
Wayne Wicker, chief investment officer at Vantagepoint Investment Advisers, told The Washington Post :
“At the end of the day, the record is just a number. Although today’s economy remains in a miserable state in an absolute sense. Markets care about better or worse, not good or bad”.
Later on Wednesday, the Federal Reserve will provide some insights into how its recovery plan is playing out.