Major indexes around the world have closed on June 30 its best quarter in years, including all time highs for the NASDAQ Composite and the best quarterly performance for European stocks in five years.
According to analysts, the rally has several fathers as factors such as free cash from the government stimulus, declines in daily cases, expectations about potential vaccines, economic reopening, and fears of missing the loop of cheap stocks have been key catalyzers in the last months.
Market sentiment remains the king
I am a believer of the market sentiment, that’s why I created the FXStreet Forecast Poll as a sentiment tool back in 2010. If people believe that a stock will go up, then it probably will.
According to Investopedia, market sentiment talks about “the overall attitude of investors toward a particular security or financial market.” It refers to the feeling of a market “revealed through the activity and price movement of the securities traded in that market.” It is also known as consensus.
Well, in current COVID-19 times, the sentiment is everything. Any news that provides investors with some hope about a potential recovery in the economy, a vaccine to fight against the new coronavirus, or any semi-good economic indicator is seen as green broths. People will buy it.
In that framework, major stock indexes have been trading with big swings full of volatility.
Currently, investors are concerned about the economy’s situation and are full of fear from a second wave of COVID-19 in Europe and Asia. Besides, the United States is becoming the hottest spot of the virus in the world… again.
Today, Dr. Anthony Fauci, White House health advisor, acknowledged that the US is “not in total control” of the COVID-19 pandemic situation. With the country now reporting around 40 thousand new cases every day, Dr. Fauci said that he “can’t make an accurate prediction but it’s going to be very disturbing.” One hundred thousand new cases every day are on the table now.
“We are now having 40-plus-thousand new cases a day. I would not be surprised if we go up to 100,000 a day if this does not turn around, and so I am very concerned.”
Wall Street closes the second quarter with a strong note
The Dow Jones Industrial Average closed the day with a 0.85 percent increase, or 217.08 points to 25,812.88. In the quarter, the Dow rallied 17.8 percent up, which is its biggest quarterly gain since the first quarter of 1987.
The S&P 500 ended the session at 3,100.29, which is 1.54 percent or 47.05 points up. In the last three months, the S&P performed its biggest quarterly rally since the Q4 of 1998.
The NASDAQ Composite closed 1.87 percent or 184.61 points positive at 10,058.77. In the second quarter, the composite jumped 30.6 percent, its largest one-quarter gain since 1999.
All experts are cautious about how the market will perform in the next quarter. With most expectations considering a V shape recovery being revised as the United States seems to back to square one in terms of COVID-19 pandemic, more investors are betting on more volatility and declines in major stocks.
However, as Ben Levisohn said in a Barron.com article published early today, “we might be witnessing the start of a new bull market.”
Levinsohn highlighted what Keith Lerner, chief market strategist at SunTrust Advisory Services, noted recently, “the market has followed each of the 10 previous best quarters going back to 1950 with a positive quarter.”
That being said, nobody knows what will happen in the near future. The proof is that the difference between strategist targets is now the largest since 2009.
And of course, they never had to deal with a virus such as the COVID-19, which is at the same time a health and a social pandemic.