The S&P 500 hit a fresh all-time high Tuesday as the US stock market continued its dizzying rally in spite of the coronavirus pandemic and the economic crisis it has caused.
The benchmark index climbed about 0.3 percent to a peak of 3,394.02 in early trading, surpassing the previous intraday record of 3,393.52 reached on Feb. 19 before the then-nascent virus outbreak sparked a historic market crash.
Two major factors have pushed the S&P and the tech-heavy Nasdaq index to new heights during the US’s worst economic downturn in a century, experts told The Post: The Federal Reserve’s unprecedented efforts to shore up financial markets and investors’ bets on companies that have thrived amid lockdowns aimed at controlling the virus.
“It’s not like third-grade soccer where everybody gets a trophy. There are losers out there,” said Andrew Left, a short-seller and founder of Citron Research. “But if you look at the winners, it’s people whose products are benefitting in the new economy.”
Tech giants such as Amazon, Apple and Netflix have led the way as coronavirus lockdowns forced consumers to work from home and spend money online. Investors also rushed into consumer staple stocks like Campbell Soup and Clorox, whose products have been swept off supermarket shelves.
“The market’s not dumb,” warned Michael Batnick, director of research at Ritholtz Wealth Management. “It’s written off the dead companies like Hertz and some of the airlines, and The Big 5 [Amazon, Apple, Facebook, Google, and Microsoft] are now 25 percent of the whole index.”
The market “searched for pockets of certainty,” said Quincy Krosby, chief market strategist for Prudential Financial. “None of this would have happened had it not been for the Federal Reserve coming in early and decisively and providing the liquidity that allowed the markets to function.”
The S&P has climbed nearly 52 percent from its March 23 low of 2237.40 as investors largely shrugged off a slew of foreboding news, including historic unemployment, a record second-quarter plunge in the US’s gross domestic product and a recent surge in coronavirus cases that forced some states to shutter businesses for a second time.
But even that unprecedented economic implosion did not do much to throw a wrench in the market’s gains.
“The median amount of days between all-time highs is 90,” mused Batnick. “It’s been 125 days since the [February] record close. Using this very cherry-picked stat, this year has been almost ordinary.”
A huge factor in keeping the market look ordinary has been the Fed’s adoption of an extraordinary, whatever-it-takes approach to supporting the markets. The central bank has added trillions of dollars to its balance sheet in recent months and bought assets it had never previously touched, such as corporate bonds.