Buoyed by government spending and optimism about the economy and its long-term prospects, indexes quickly began a recovery after bottoming out in the last half of March 2020. After just a few months, the S+P 500, Dow, and Nasdaq had all regained the value they lost, putting the market well into bull territory. By late August, the S+P 500 and the Nasdaq were up 58% and 75% from their March 23 lows.
But all that gravy hasn’t been spread evenly: The main gainers have been Amazon, Netflix, Salesforce, Microsoft, Alphabet, and other monster tech companies that profited from our newly sedentary and homebound lifestyle. Many other companies, especially some in the retail and hospitality/travel sectors, have been more or less treading water, or going bankrupt.
According to Christian Mueller-Glissmann, a portfolio strategist at Goldman Sachs, the current high stock prices may act as a “speed limit” in the future, meaning that investors will soon have to access whether those levels are merited by future performance: “This is what always happens after a bear market. You get an initial very sharp recovery, and then you get a period where the market actually sees what type of earnings growth you’re really getting.
“We feel that after this initial explosive recovery in growth, there might be a bit of disappointment for what you get in fundamentals.”