This was another record-breaking week for the S&P 500. The index rallied 1.9% and all-time highs continue getting even higher.
Biden assumed the presidency on Wednesday with far less drama and rancor than we’ve seen in recent weeks, which was a welcome sight. That said, investors were not really concerned and the market rallied modestly on the news of a peaceful transition. But this makes sense. Stocks were not selling at a discount because of this political uncertainty and that meant there wasn’t much room to bounce when reality turned out less-bad than feared.
If we step back and look at the big picture, this was one of the most contentious elections in recent memory and Covid infection and fatality rates are off the charts. How does the stock market react to all of this bad news? By carving out fresh highs.
If this bull market really was as overbought and fragile as the cynics claim, there have been more than enough bearish headlines to send this crashing. Yet here we stand.
As ugly as the headlines have been, these things are old news and already priced in. Investors are always looking six months ahead and no matter how bad things look today, between a highly effective vaccine, warmer summer months, and an endless supply of free money, investors are actually in a pretty good mood.
While it feels like this market has gone too far, it always feels that way at the highs.
Stick with what has been working and that is holding for higher prices. Keep our stops in the mid to upper 3,700s and see how far this goes.
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