After cratering back in late March at the outset of the pandemic with shutdowns and general uncertainty about the future of the country, it climbed all the way back and some over the course of the summer and the early fall. Now, the stock market is having a pretty good month, as latest reports say that it has reached its best November gain since 1928, almost exactly a year before the October 1929 stock market crash that ushered in the Great Depression. Are we on a similar path now? It’s likely too early to tell.
The stock market gains for the S&P 500 and the Dow Jones Industrial Average, traditional markers for the market in general, had been steadily climbing over the summer. But they kicked the month of November off with a bang around the presidential election. It climbed multiple percentage points on the day of the election and after. That, combined with what’s predicted to be a strong holiday buying season, appears to have markets bullish on the short term future. That’s presumably a good sign for the country, considering we are still mired in a pandemic.
On that latter point, there’s been some relative disconnect between the stock market and what’s presumably seen as the state of the country during these COVID times. With cases on a steady rise, almost mirroring on the graph the gains of the stock market, it can be confusing how market trajectories could follow on an upward trend in these times of uncertainty. One reason is that bigger businesses haven’t seen some of the same economic pain that’s been caused by the pandemic, and because stock market prices tend to be more predictive and future-looking, there could be hope that a vaccine and other medical strides will have the pandemic pain reduced in the coming months.
Finally, low interest rates have likely helped as well, seeing as how a drop in rates has tended to lead to gains in the stock market. The lowering of interest rates came in response to COVID-related economic uncertainty and allowed for additional cash to enter the markets. While this is never tried and true science, there are enough factors to explain why we would see stock market increases in a time when things are more than a little bleak. Again, the stock market doesn’t always reflect the reality folks see in their everyday life.
The last time the stock market hit such November peaks, it meant doom just one year later. Could history be repeating itself? Some economists sure think we could be on a similar path. Those more bearish about market futures would cite global influences, high unemployment numbers, and lack of coordinated government pandemic plans as reasons for pessimism.
But for now, this is all speculation and in the short term, the stock market does continue to see steady gains as we enter December and the holiday season. We are coming off of the biggest Black Friday sales day in history and could be looking at a huge Cyber Monday as well. That kind of purchasing confidence could continue a market climb over the coming weeks.