Stocks Are Defying the Naysayers. They Can Keep Going.
The S&P 500 Index just rallied back to all-time highs, brushing off the April tariff shock, the conflict with Iran and the insidious and persistent increase in US continuing jobless claims. A growing chorus of bears thinks traders are whistling past the graveyard, and they're far from crazy to think so. But then again, index highs almost always feel like this.
Consider August 2020, when the Covid-19 pandemic was still in full swing. The government data had put unemployment at over 10%, and yet blended forward price-earnings ratios were in the 99th percentile of the previous two decades. There was some general optimism about the prospects for a vaccine, but clinical trials were still ongoing and a summer surge of Sun Belt cases had dashed hopes for a quick resolution to the pandemic disruptions. Meanwhile, a popular narrative posited that 'dumb money' retail traders were driving the stock rally. How did that turn out? Even after the Aug. 18 high, the index returned another 11.5% in 2020 and 28.7% in 2021. Not too shabby.
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