This stock bubble is the greatest and craziest of them all.
Cross-posted from The Great Recession Blog.
The Depression is deep, and the pain is wide.
Yet, the NADAQ is a rocket, attempting to break out of earth’s atmosphere. As I wrote several days ago and reiterated yesterday, saying I’d follow up with greater detail today, this bubble in stocks is the most extreme euphoria ever seen. It will, however, blow when the initial burst of good news from reopening gives way to the reality of all that did not recover after reopening.
That endless lineup of headlines is arriving now.
Since COVID-19 has been rebuilding its claimed outbreaks around the nation in the news, the market has become troubled, knocking the S&P 500 and the Dow back down to that seemingly magical 61% retracement fibonacci line on the charts that really big rallies after really big crashes like to top out at.
As I mentioned yesterday, the Nasdaq has pressed on ahead in a tear. Here is how it looks relative to the rest of the economy (GDP). See if this picture looks stable to you:
And how well did that work out last time?
“Ahh,” you may say, “but this time it is only because then denominator (GDP) has crashed so hard.”
“Nay,” I say.
It is also because, in six days, the five top stocks in the NASDAQ have added half a trillion dollars to the market’s value; and, since the start of this wondrously promising year, they have added 1.6 trillion! All but one of these companies have claimed a heady position in the trillion-dollar-company club.
I’m sure that is not because their businesses have become so much more promising during 2020, earning this appreciation.
As Sven Henrich notes,
That would be a feat during any bull market during times of great growth, but in a historical recession?
So, while the Dow and the S&P got decapitated the second a new COVID-19 surge took the headlines back, the NASDAQ has continued to be a riot of irrational enthusiasm…