Coronavirus Pandemic – Stock Market Milestones: Dow 30K and Nasdaq 12K

Though the major stock indices, including Dow and Nasdaq, fell sharply at the onslaught of the pandemic in March, they have made a spectacular turnaround since then, hitting new all-time highs. Dow reached a historic 30,000 milestone while Nasdaq crossed 12,000. 

After swooning to 18,592 on 3/23 from a February high of 29,551, Dow continued its steady upward swing until 9/1 when it hit 29,101, coming very close to the previous high. It went through a mini-correction in September, falling to 26,763, creating a good re-entry opportunity for the new investors and those who buy the dips. On 11/16, when Pfizer announced its awe-inspiring Phase-3 vaccine results, the index eclipsed the February high, and on 11/24, it crossed the historic 30,000 marks and recovering 11,454 from the March lows.

Though the Nasdaq's story has been similar to that of Dow -- plummeting in March as the pandemic gained momentum -- it has shown more strength since the beginning of the recovery, trending more linearly than the Dow.  For instance, on 6/18, Nasdaq surged past the February high of 9,817 and hit 12,056 on 9/2, making a historic comeback and achieving such momentous feats well ahead of Dow.  

The above regression scatter shows how Nasdaq had outperformed Dow after the intersection point of 26,000 and 9,500. To put it in proper perspective, during the recovery period between 4/1 and 11/25, Dow has bounced back 32%, while Nasdaq has jumped 53% -- a stunning 20% spread, which is why the r-squared value has been a moderate 0.588, rather than the usual lockstep value of 0.90 and above.

Here is a look at the market achievement from a more humane perspective: The pandemic made the rich significantly richer, while the poor further regressed with more all-around devastation, paving the way for a more rapid widening of the ever-expanding wealth gap.

To save the poor and middle-class from the cyclical downturns and future calamities, we need to introduce Universal Basic Income (UBI) as soon as possible so that they can also cheer the Dow 40,000 in chorus. Right now, they are just silent spectators, worrying about money for rent and utilities. Worse yet, in poorer countries, millions of children are going to bed hungry while their mothers are starving.

What a spectacular achievement!

Stay safe!

-Sid Som

homequant@gmail.com

Coronavirus Outbreak – NASDAQ Ignores Pandemic and Makes New All-time High Reaching 10K Marks

(Click on the image to enlarge)

The tech-heavy NASDAQ, along with the other broader market indices, has been on a tear since bottoming out on 3/23. Though all three major indices -- Dow, NASDAQ ("index") and S&P 500 -- have moved in tandem, the index managed to reach the finish line first. Today (6/9), the index not only made an all-time high, but also reached a new milestone of hitting the 10,000 mark. 

It is almost astonishing that the index would marshal such firepower amid a once-in-a-century pandemic. This is truly something to write home about.

Highlights...

1. Before the onslaught of the pandemic, the index made a new high of 9,838 on 2/19. However, on 2/25, the CDC alerted the American public for the first time to prepare for an outbreak in the US, causing massive panic among the general public and businesses. Consequently, the index remained in a free-fall for the next three weeks.  

2. On 3/23, all three indices hit the bottom. After hitting an intra-day low at 6,631, the index quickly reversed trend and started shooting up, quickly hitting an intra-day high at 6,985 and closing well above the low at 6,861. As the top chart shows, since that day, the index continued a sharp V-shaped recovery until today, reaching that marvelous feat. Though Dow and S&P 500 closed down today, the index closed in the positive territory with a 29-point gain.

3. Of course, between 3/23 and 6/9, there were days when the index closed down, but there was only one occasion when it closed down two days in a row (5/12 and 5/13). All other down days were followed by up days, meaning the index closed in the green. In fact, the index closed up with at least 200-point gains on eight occasions and on two occasions it returned 190+ points. On the other hand, it closed down with 200-point losses on only four days.

4. As the index started closing in on the 10K milestone, the excitement skyrocketed, as evidenced by the spike in volume (the volume chart). In the last four days, the daily volume jumped to 6B, from the prior average of 3.52B. Of course, during the period of panic, the index did register 5B volumes on three occasions. This demonstrates how fear and excitement tend to impact both price and volume in the market.

5. Amid all this excitement, there is some built-in sadness. During this period, millions lost jobs so they were unable to participate via the 401(K) which -- for the 99% -- is one of the most common ways to participate in the market. Also, in order to cope with the fallout from the pandemic, many businesses, especially the hardest-hit dining and retail sectors, have either totally eliminated or reduced 401(K) employer matching, somewhat denting the incentive for those otherwise unaffected by the mass lay-offs.

Anyway, it was a historic day for the index while we look forward to similar milestones for Dow and S&P 500 in the days to come.  

Stay safe!

-Sid Som 
homequant@gmail.com