Bear market rallies are common and history suggests that the S&P 500 could rally to near 3000 and then "still roll-over and touch new lows" before a full-fledged recovery begins, Bank of America said.
Well, we are on the cusp of S&P500 3000 now, it may well clip slightly then drop or not at all tonight, this will be the real test. But if I want to be like Trump (to win both ways), I would also quote BoA above that crossing 3000 does not necessarily negate a return to previous lows. Remember the markets have ways to surprise both to upside as well as to the downside.
We know that like the rally that led the market breach 3000 and beyond before it nosedived, the market can remain divorced from earnings fundamentals for so long as market psychology is upheld. While the Fed had restored that psychology just by jawboning and threatening to use its arsenal, the market remains very much circumspect because market participants know they're not getting value. But they would continue buying up as long as perception remains that they can stay up. That perception is not based on well rooted rationale other than positive sentiment based on the Fed put, to some that may be enough but progressively as the markets move higher on hollow ground in the midst of increasing geopolitical and economic risks with an unknown timeline for the resolution to the pandemic , that sentiment would soon reverse course and when it does, it can be very swift.
Can we believe that the equity markets be totally immune from the economic pain so many are facing on Main St, and the pain is very real and would like manifest into more pain in the months to come.
Very few would imagine we got this far let alone dare dream or hope it can reach pre-crisis levels in the midst of a depression like economic environment. Like in January, the disconnect would eventually end in tears the longer and wider the disparity, the only question is when. As the saying, if it is too good to be true, it usually is.
