S&P 500's historic rebound leaves investors divided on future
13 August 2020
Data: Money.net; Chart: Axios Visuals
The S&P 500 nearly closed at an all-time high on Wednesday and remains poised to go from peak to trough to peak in less than half a year.
By the numbers: Since hitting its low on March 23, the S&P has risen about 50%, with more than 40 of its members doubling, according to Bloomberg. The $12 trillion dollars of share value that vanished in late March has almost completely returned.
What's happening: The record-breaking rebound has divided investors, with some betting on a new bull market run that will take stocks well above their current levels and others hunkering down for a major pullback.
Details: Many institutional asset managers continue to sit the rally out, preferring to buy bonds or stay in cash.
- Data from the Investment Company Institute showed that money market funds remain above $4.5 trillion as of the week ending Aug. 6, with inflows to MMFs that week for the first time since mid-May.
- Bond funds have seen inflows in each of the last three months, including $100 billion of inflows in June.
- Stock funds, on the other hand, have seen consistent outflows with data from Bank of America showing the largest outflows in 11 weeks last week.
What we're hearing: There's a tug of war going on in the market, not just between bulls and bears but between investors who believe the economy is bouncing back and others who are simply holding on in high-flying tech stocks because there is no alternative to the equity market.
- The former strategy has led to increased buying in small-cap stocks and re-opening plays like hotels and airlines (the JETS ETF has risen seven of the last eight days, including a 4.8% gain on Monday), as investors look to add some names to their portfolios just in case a successful COVID-19 vaccine is quickly developed and distributed.
The pain of losing $10 trillion in U.S. GDP and 53 million people who have filed initial jobless claims has been "numbed" by $21 trillion in policy stimulus — $2 billion per hour in central bank asset purchases, says Bank of America chief investment strategist Michael Hartnett.
- "Nothing matters but liquidity."
Between the lines: The impressive rebound has masked some significant divergence, Hartnett notes.
- If the S&P 500 were just the tech sector it would be above 4,000.
- On the other hand, if it was just U.S. banks and energy companies it would be under 2,100.
- So far this year, FAAMG stocks (Facebook, Amazon, Apple, Microsoft and Alphabet) are up 35% while the other 495 stocks have risen less than 5%.
Transcripts show George Floyd told police "I can't breathe" over 20 times
Section2Newly released transcripts of bodycam footage from the Minneapolis Police Department show that George Floyd told officers he could not breathe more than 20 times in the moments leading up to his death.
Why it matters: Floyd's killing sparked a national wave of Black Lives Matter protests and an ongoing reckoning over systemic racism in the United States. The transcripts "offer one the most thorough and dramatic accounts" before Floyd's death, The New York Times writes.
The state of play: The transcripts were released as former officer Thomas Lane seeks to have the charges that he aided in Floyd's death thrown out in court, per the Times. He is one of four officers who have been charged.
- The filings also include a 60-page transcript of an interview with Lane. He said he "felt maybe that something was going on" when asked if he believed that Floyd was having a medical emergency at the time.
What the transcripts say:
- Floyd told the officers he was claustrophobic as they tried to get him into the squad car.
- The transcripts also show Floyd saying, "Momma, I love you. Tell my kids I love them. I'm dead."
- Former officer Derek Chauvin, who had his knee on Floyd's neck for over eight minutes, told Floyd, "Then stop talking, stop yelling, it takes a heck of a lot of oxygen to talk."
Read the transcripts via DocumentCloud.