Enthusiasm for potential treatments for COVID-19 continued to boost stocks in this brand-new bull market.
The major indices were helped Monday by an Emergency Use Authorization from the Food and Drug Administration to use antibody-rich plasma from recovered COVID patients to treat serious cases in new patients – despite thin evidence so far of its efficacy.
Financial Times (paywall) also reported on Sunday that "the Trump administration is considering bypassing normal US regulatory standards to fast-track an experimental coronavirus vaccine from the UK for use in America ahead of the presidential election, according to three people briefed on the plan," but AstraZeneca (AZN) denied that report.
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The S&P 500 (+1.0% to 3,431) and Nasdaq Composite (+0.6% to 11,379) both set record closing highs, and the small-cap Russell 2000 gained 1% to 1,568. The Dow Jones Industrial Average was the strongest of the major indices, gaining 1.4% to close at 28,308; it remains about 4% below its Feb. 12 all-time closing high.
Looking ahead: Dollar General (DG), Nordstrom (JWN) and Williams-Sonoma (WSM) are among the companies to watch out for in a retail-heavy earnings slate.
The Market's Heavy Tilt Continues
They say a rising tide lifts all boats, but that hasn't been precisely accurate this time around.
Despite Monday's "rotation" day that saw more cyclical sectors take the lead, technology (and tech-related) stocks with mega market values have done most of the lifting in boosting the major indices to record highs, even as many other stocks have delivered dismal returns.
"'Big tech' (how they’re generically compartmentalized) has been a powerful force. Rightly so, the dominance of the five largest stocks in the S&P 500 have received much investor attention (and buying pressure)," writes Liz Ann Sonders, Senior Vice President and Chief Investment Strategist at Charles Schwab, in recent market commentary. "In equal-weighted terms, they represent 1% of the S&P 500; but in cap-weighted terms, they now represent nearly their own quartile."
"That said, it would be in keeping with history for at least some short-term consolidation – which could simply take the form of a rotation away from the concentrated leadership areas vs. something more sinister. Most historical studies of similar periods of concentration show a tendency for flat-to-lower stock prices short-term; but higher prices longer-term."
That shouldn't put longer-term investors off the tried-and-true formula of buying cheap, market-tracking exchange-traded funds, but it's understandable if even generally conservative investors want to be a bit more tactical with their approach. Stock picking is back in fashion because of stark disparities in individual share performance this year. Individual asset classes and market sectors are leaving others behind in the pandemic's new normal.
One way to build a nimble but diversified portfolio aimed at weighting current winners over laggards is to gather up a variety of low-cost ETFs. Read on to discover Kiplinger's 20 favorite cheap ETFs that cover various facets of the market.
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