Just when you thought you had escaped the clutches of 2020, I'm here to bring it back into the picture. It's been a couple weeks since we turned the calendar forward from a nightmarish year, so why talk about it again? Seems there are some similarities here within markets that are tugging at me, and that means a deeper dive into what has me worried.
How did you feel when the calendar turned on Jan. 1? Any better than you did on Dec. 31? Probably not, but if you did, that placebo was pretty effective. Our problems did not just go away with the completion of a turn around the sun. No, we are still battling a pandemic, the election results were still in the headlines and Tesla ( TSLA) stock continues to run like a banshee.
People are still struggling to stay afloat with less funds and their backs against the wall. Businesses large and small are paralyzed, dropping out altogether to perhaps never come back. It's a mess that the Fed is trying to help clean up, but with barely any help from its partners in Washington (Congress, Senate and the president).
These issues were not there a year ago, but they were just starting to become real. Recall a year ago when the stock market was ticking at all time highs in mid-January after a relentless run higher from September 2019. At that point we saw extreme lows in volatility. After the breakout in Oct 2019 to new highs, what was there to fear?
But the world seemed to be crashing down just months later to everyone's surprise. The markets were in for a rout of monumental proportions. If you did not have protection a year ago or did not sell down then you were severely punished during the worst month in the history of the stock market -- down 34% in just four weeks. Could this happen again in 2021? Sure, anything is possible, but not likely with the Fed continuing to pledge it's service to the economy and markets.
Last week's market action was poor at best. While it's not likely signaling a change in character, we always have to be on guard for one. After all, how do you follow up a scorching two month run to end the year? That's a tough act to follow, just ask February 2020.
