The stock market is blocking bad news now and is saying the “worst is behind us“
It is the Key rationalization for the expansion, expansion to the point where the S&P 500 is trading today at a higher P/E multiple based on forward 12-month earnings 19.7X than it was trading at on 19 February at 19.1X. That is the highest P/E multiple since Y 2002.
There is a lot of hope re reopening based on assumptions that the worst of the COVID-19 economic impact is in the scrapbook.
There is a pile of cash on the sidelines driving “flat squeezes” as the stock market’s resilience is driving a fear of being left out among underexposed money managers.
There is a preference for quality and growth stocks, which are more heavily-weighted and influential drivers of the broader market.
There is the expectation that more positive news than negative news will be heard in coming weeks/months with respect to COVID-19 coronavirus treatments.
There is still a willingness to look past the earnings decline of Y 2020 to the rebound of Y 2021.
Plus, there is the Fed put to contend with, not only with the actions already taken to boost liquidity, but the ultimate risk for short sellers of the Fed perhaps expanding its toolkit to buy stocks. There is the adage, “do not fight the Fed” So, have faith in the Fed, that should last a long time even at 19.7X forward 12-month earnings.
Monday, the major US stock market indexes finished at: DJIA +358.51 at 24133.78, NAS Comp +95.64 at 8730.17, S&P 500 +41.74 at 2878.48
Volume: Trade on the NYSE came in at 970-M/shares exchanged
- NAS Comp -2.7% YTD
- S&P 500 -10.9% YTD
- DJIA -15.4% YTD
- Russell 2000 -23.2% YTD
HeffX-LTN’s overall technical outlook for the major US stock market indexes is Bullish with a Very Bullish bias, as the Key indicators are Very Bullish now.
Looking Ahead: Investors will receive the Conference Board’s Consumer Confidence Index for April, the S&P Case-Shiller Home Price Index for February, and the Advance March reports for International Trade in Goods, Retail Inventories, and Wholesale Inventories Tuesday.
Have a healthy day, Keep the Faith!