There is a lot of bad news right now with respect to the coronavirus. The stock market right now, though, isn’t bothered by any of it. There’s a chance it could be eventually, but right now, the only coronavirus news that is registering for the stock market is the likelihood that there will be an approved COVID vaccine in use in 2021.
That’s why the small cap, cyclical, and value stocks have taken flight this week, and it’s why the futures for the major indices are all trading higher this morning even though there are reports indicating the seven-day average of coronavirus cases in the U.S. is spiking, that more states are restricting certain business activity, and that hospital and ICU capacity is being tested.
Right now, however, the S&P futures are up 24 points and are trading 0.7% above fair value, the Nasdaq 100 futures are up 112 points and are trading 1.0% above fair value, and the Dow Jones Industrial Average futures are up 151 points and are trading 0.5% above fair value.
Right about now some participants are tuning in to learn that Goldman Sachs is forecasting the S&P 500 to reach 4300 by the end of 2021 because of the supportive vaccine impact and the market-soothing prospect of a divided government.
That forecast implies a 21% price return from current levels, which right about now probably has many market participants fearful of missing out on further gains and aiming to put cash to work.
Unlike recent sessions, more of that cash could be finding its way into growth stocks, but the futures market suggests there will be enough to go around to benefit most stocks when the opening bell rings on this Veterans Day.
The Treasury market is closed today in observance of Veterans Day, yet that will offer some extended time for market participants to spy a 10-yr note yield (0.98%) that is on the cusp of sporting a “1 handle” again.
Rising rates could eventually become a problem for the stock market, but right now they are being celebrated as a reflection of the economic and earnings booster shot the vaccine is expected to provide in 2021.
That sentiment has given a huge lift to many stocks shunned in the work-from-home/stay-at-home trade. Lyft (LYFT) is one such stock that has gotten a lift. It is up 21% so far this week and is indicated another 5.7% higher this morning after the ride-sharing service pleased investors with its Q3 earnings results and commentary.
Right now, it is fair to think the stock market is overbought on a short-term basis and due for a pullback. The Russell 2000 is up 12.9% this month, the Dow Jones Industrial Average is up 11.0%, and the S&P 500 is up 8.4%.
Individual stocks and the broader market, though, can stay overbought for extended periods. This just may be one of those periods, because right now the market doesn’t seem to be all that bothered by what’s happening in the present with respect to the coronavirus and the contested election. Instead it’s looking to what it believes right now will be a brighter future in 2021.
Originally Posted on November 11, 2020 – The Future Is Right Now
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