Records Galore and Fall is Coming.....

Congratulations Joe Biden and Kamala Harris for Democratic Nomination for President and Vice-President and Best of Luck for winning the elections!

Exactly six months earlier S&P reached all time high - that happened in BC (Before COVID). World changed with record unemployment across most of the countries, many folks who have jobs are working from home and close to 800,000 people died due to novel virus COVID-19. But markets don't seem to care...it took 3-4 weeks to lose 34% from Feb 19 to Mar 23 and since then it has not looked back. If you want to see what V-shaped market recovery looks like, just look at S&P chart. It has recovered all the losses and some more and reached all time high last week. And it all can be attributed to select few companies - many of them happened to be in Bay Area. Paradoxically instead of celebrating these with dot.com type excitement, we are all holed up in our houses and packing our bags in case we have to evacuate due to fires burning across Bay Area. In this record market run, one company made its own record - Apple became first $2 Trillion market cap company in American History (most likely world history). And it did not stop there. Last week, it was adding market cap equivalent of that of Boeing ($95 B market cap) and some change in a single day. Other stock which is not in S&P is having its own record run - Tesla crossing $2000. Along the way, I even lost track of how big Tesla has become. Must be bigger than Exxon, Chevron, GM and Ford combined! What's point in keeping track of these major market cap shifts when valuations seems to be defying logic.

Well - we had seen this movie before! In 1999-2000, only thing companies need was .com in their name and they could do IPO with billion $ valuation and first day gains of 100-200%. 20 years later, .com is replaced by covid-19 vaccine (e.g. CureVac, Novax, Moderna), Electric vehicles (Tesla, Nikola, Workhorse), Online shopping/betting (Overstock, Wayfair, Etsy, Meli, Shopify, Draftking). When things become normal (and they would), we would have to see how many of these companies can hold/grow into their outsized valuations.

That brings me to question - when would things become normal? If we look at calendar, we are in final dog days of summer and fall is about to start. Going back to 2009, check out this CNN article of market action on Oct 1, 2009. This year, it would be almost replica of this and I won't be surprised to see similar articles coming in Oct. 3rd quarter would end with double digit gains. And hen election blues will take over the market. Markets would start going sideways over next 3-4 weeks and have short-term pain in Sept/Oct. Only after US presidential elections, markets would get some clarity on policy. By that time, politics of how to handle COVID crisis would have reached peak. Whoever wins the white house need to decide next steps in the virus crisis since it's going to stay with us at least for another year. If Trump wins, it would be usual chaotic, fragmented response and declare victory too soon. If Biden wins, it would be cautious, shut-down-country type of response. In either scenario, US would have close to 10 million infections and quarter million deaths before it all settles down. Till then, stay safe and healthy!

For all Indians, Happy Ganesh Utsav!

/Shyam