And there you have it folks. The S&P500 made a new all time record high yesterday.
Never has it traded higher... never.
All those market pull backs, collapses, trade wars, government shut downs, Ebola, Cyprus, Turkey, Coups, Iran, Tsunamis.... we can go on and on... there has been so many excuses for this market to sell off.
And yet here we are getting perhaps the most 'obvious' excuse to sell of them all and stocks trade to record highs. Go figure.
The Pandemic, Covid-19, was a bears wet dream. A global economic shutdown the likes the world has never seen before? The massive toll it would exact on the economy was going to be unprecedented.
After 10+ years of drawing giant red down arrows on all their bearish charts and seeing the market do the exact opposite of what their long winded research reports thought it would do... finally.... finally there was something that could make all their bearish market research look right.
Back in late January I mused that the bearish crowd was likely rooting for the Virus so that their downside projections for the stock market, you know, those relentless 60% market crash calls, could finally be validated.
We had a record breaking decline from 52 week highs to 52 week lows. But the decline barely got the S&P500 back to the lows from late 2018. That's not exactly a stock market calamity. 60% decline? No. Not even close.
Here we are, the worse economic disaster of our lifetimes and the stock market still wasn't fulfilling all those bearish pundits wild fantasies.
And I've said this previously as well... many times....
All the reasons the bears give, the facts they lay out, as to why the stock market should be trading sharply lower than it is... are actually reasons why the market continues to move higher.
The Pandemic is the perfect example of just that. Shutting down the global economy for months... you would think that would absolutely crush companies and the stock market.
But what happened?
The FED stepped in with a response that DWARFED the financial crisis response.
Too Big To Fail has moved from the financial institutions in 2008/2009 to just about everything in 2020. The FED is even buying corporate bonds!
I said it many years ago that the next recession could see stock prices head higher and not lower.
Because the FED's response will be that much bigger than next time around. Sure enough that is what has happened. Couple that with a record fiscal response, and the stock market has rallied to never seen before heights, despite 10%+ unemployment and many companies, industries on the brink of Chapter 11.
When will all those endless bearish prognostications come to fruition... if ever?
--Be Careful What You Wish For -
The bears have been wishing for economic devastation. They've spent the last 10 years wondering how the stock market could rally despite stubbornly slow growth, low muted inflation, and clearly an economy that was not as strong as the stock market. However the market continued to climb that proverbial wall of worry, guided by the hand of the Central banks.
Low interest rates, growing money supply, low inflation, corporate share buybacks, growing corporate debt... all of these factors helped fuel higher stock prices.
The slower the growth the better. The lower the inflation the better. This meant that the FED had every tool in its toolbox ready to deploy at a moments notice.
Last fall the REPO market was blowing up... it was supposed to take markets down... but it didn't. Why? The FED stepped in and backed the REPO market.
So let me cut to the chase.
When I say be careful what you wish for... the bears have it all wrong. They've been wishing for economic destruction to validate their bearish market perspectives.
All the negatives keep the Central Banks involved.
What the bears should be wishing for is EXPLOSIVE growth. Which will lead to the long elusive inflation.
Yes.. for the bears to to finally get their dreams to come to true, they need to be wishing for prosperity. Growth. An economy so strong that inflation begins to become problematic.
So problematic in fact that the FED needs to hit the brakes. All these years they've been either on the gas pedal, slowly pulling their foot off the gas pedal, or, like the recent Pandemic response, their foot has pushed the gas pedal to the floor.
Interest rates have been trending Lower for 40 YEARS!
Corporate debt has been growing for over 40 YEARS!
Amid a back drop of high inflation and climbing interest rates, the FEDs tool box will remain closed.
Those massive corporate debt levels become a much bigger problem amid a rising interest rate backdrop.
I know its tough for those bearish folk to wrap their minds around. Rooting for a strong economy is not something they are accustomed to doing. Being positive about anything.. .is likely an issue.
However rooting for total economic destruction has not worked. The absolute worst economic disaster of our lifetime has left in its wake higher stock prices, not lower ones. And like this epic stock market rally to record highs... it's something they never saw coming.