You’re probably aware of the US stock market’s recent frenzy.

In many situations it’s dangerous to bet against the consensus view baked into the price of the financial market.  Currently the US stock market looks like it’s priced for perfection. With the distribution of the COVID vaccine accelerating and the unveiling of another J&J one-shot vaccine around the corner, financial market participants have reasons to feel optimistic about the economy and stock market.

The US economy has remained resilient despite COVID-19 infection cases reaching a new peak on January 8th. The fourth quarter earnings in Year 2020 grew at 2% YOY for 60% of S&P 500 companies which have already reported. After leveling out for almost two months at the end of 2020, the unemployment rate fell again in January 2021. Hiring has the potential to resurge from the start of the year, according to the data of some job seeking websites. The size and scale of government stimulus, which includes an additional $900 billion passed before the end of 2021 and very likely another $1 trillion for the near future, exemplifies the government’s determination to invigorate the economy and market. 

The market heralds the upside surprise of an unexpectedly large stimulus package and exceptional economic activities. Some financial institutions have begun revising their annual forecasts.

But still, we must be cautious. More COVID-19 mutations are plausible, considering the scale of the infections. While Pfizer and Moderna scientists have stated the virus should be manageable with either new strain specific vaccines or boosters, the bottleneck in the production could limit the vaccine’s supply for some time. Other approved vaccines, such as the Oxford-AstraZeneca vaccine, might be less effective against new mutations, according to the latest report from Bloomberg News. The coordination among different countries’ governments in the vaccination campaign will also play a key role in the effectiveness of the vaccine. Israel was the leading country in vaccination speed, but was still heavily impacted as the new UK virus mutation proliferated through the population of unvaccinated people. This was partly due to the Israeli government’s lack of foresight.

We believe that the Biden administration faces high stakes on controlling the virus and is working diligently towards the promise. But the future still holds many unknowns. 

Even though the market has been rising unstopped for the past few days, we need to keep our strategic allocation. Financial market participants tend to place relatively more weight on recent events than statistics justified. However the stock market pricing depends on a lot of factors. We must evaluate the broader framework to analyze current events.

IMPORTANT DISCLOSURES

This information has been designed for general informational and educational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security. Such offers can only be made where lawful under applicable law. These materials have been obtained and derived based on information from public and private sources that Pearl Wealth Management LLC believes to be reliable. However, no representation, warranty or undertaking, stated or implied, is given as to the accuracy or completeness of the information contained herein, and Pearl Wealth Management expressly disclaims any liability for the accuracy and completeness of this information. Pearl Wealth Management does not intend to provide investment advice through these materials and does not represent that any market position, economic forecast, securities or services are suitable for any investor. Investors are advised not to rely on these materials in the process of making a fully informed investment decision and they do not render business, tax or legal advice. Each client or prospective client should consult his/her own attorney, business advisor and tax advisor as to legal, business, tax and related matters concerning the information contained herein. The information, opinions and views contained herein have not been tailored to the investment objectives of any one individual, are current only as of the date noted and may be subject to change at any time without prior notice. Past performance does not guarantee future results. All investing involves risk of loss including the possible loss of principal.


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