Good Monday morning.  The market is off to a weaker start today as fear of a spread of the coronavirus within the White House is leading to a bit of profit taking following last week’s rally.  This contrasts with increasing momentum to re-open the economy despite the health care risks that come with that.

I have been speaking to a lot of institutions over the past few days that simply do not understand why the market is expecting such big economic recovery based on what they are seeing in their day-to-day business life and the overall economy.  They believe the market is irrational, which got me thinking about what has driven the upside.  First, the key is to define what market you are referring to because while the S&P 500 (SPX) is up 30% from the 03/23 low we would like to point out the following:

  • The majority of the gains took place in the first two weeks – 25% of the 30%.
  • 24% of the gain has been concentrated in just six mega-cap stocks
  • The sectors that have led the market higher in anticipation of an economic recovery have been among worst performers
  • The U.S. Treasury market yields are at/near record lows


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