Quite frankly, 2020 has clearly taught us not to assume the logically intuitive , the disconnect in the markets from the broader economy is prolonged by ISO speculation and I won't be surprise that can continue in the current environment when people continue to WFH and interest rates remaining very low.
Technically, there is an increasing case for a broadly lower US market and perhaps we may have inked the peak in market indices for years to come. And like I said before, Nov 3 is the expiry date for the market rally if it does not end before then. Will the Dow scale back in the coming months and years like it did in the 30s? If the pandemic does not end in 2021 (despite the vaccine) and if we see a larger retracement in the FAANGMT stocks, and if the Dems win and introduces anti-trust rules on the FAANGs then we could see risk of that happening.
But I feel optimistic we could see a two speed market - we may see banks and big blue chips continue to languish providing a drag on key market indices everyone looks at to gain a view of overall market direction. But at the same time, some very strong growth sector stocks (I addressed this in my morning note) can flourish brilliantly despite market indices going nowhere or going lower. And that is where I believe where we should be at albeit in measured proportions.
