The S&P 500 is flashing signs of strength amid signs that the worst of the coronavirus pandemic pay have passed.
The S&P 500 surged over 7% on Monday as investors found their appetite for risk renewed. News broke out that New York, the country’s largest coronavirus hot spot, saw a significant drop in the daily death toll.
After Monday’s furious rally, the bellwether index is set to recoup $1 trillion in market capitalization.
It’s not just New York that’s seeing positive developments in the fight against COVID-19. Other large states including New Jersey, Michigan and California are showing massive signs of improvement. The doubling time for deaths in ten states is slowing.
While many look at the number of cases to measure the severity of the pandemic, scientists and epidemiologists track the doubling time of death. Princeton scientist Dr. Sam Wang explains why this metric is objective.
Death by coronavirus is unmistakable, & occurs by sudden respiratory distress. Easily identified. Cases are distorted because testing is still coming online. Increasing caseloads can demonstrate spread – or effective medical response.
Dr. Wang also says that the worst of the pandemic is over when the doubling time is greater than three days.
With a doubling time of 3.7 days from 2.3 days last week, New Yorkers have a big reason to celebrate.
While the pandemic is showing signs of leveling off, expecting the birth of a new bull market is wishful thinking. The S&P 500 has managed to rally over 21% from the March low of 2,191.90. Significant gains over a short period are usually subject to profit-taking.
Stock trader and widely-followed author Mark Minervini echoes this view. He believes that a quick recovery is very unlikely.
What’s even more concerning is that 43 companies have announced that they’re suspending buyback programs. The Wall Street Journal reports that company buybacks have added $4 trillion in market value since 2009. The flow of money from corporations powered the longest bull market in history.
As many companies halt their buyback programs, demand won’t be the same for the stock market.
The S&P 500 may be flashing signs of renewed vigor as deaths caused by the novel coronavirus taper off. Patients are quickly recovering but to say the same for the S&P 500 is wishful thinking.
The above should not be considered trading advice from CCN.com.
Last modified: September 23, 2020 1:48 PM