A year ago this week the stock market was hitting new highs and it was all aboard. Buyers had all but ignored the so-called Wuhan virus and were buying pretty much everything in sight given the strong earnings just reported during an excellent reporting season.
Underneath, though, there was a story simmering that would cause one of the swiftest bear markets in history.
This is the story of that bottom.
The financial markets were still in a coronavirus-inspired funk as March 26, 2020, approached. As highlighted in Part 3 of "The Birth of a Market Bottom," gloom prevailed as we knew what awaited us on that Thursday. It would be the worst weekly initial jobless claims report on record.
But before we could get those numbers out, something extraordinary happened. Federal Reserve chief Jay Powell went on NBC's "Today" show at the top of the hour. It was a remarkable performance.
Powell sat in front of a wall of Federal Reserve Bulletins, a bizarrely out-of-place July-December 1987 volume, The Crash of '87, to his left. He proceeded, matter of factly and unemotionally, to outline how the Fed was going to put an unprecedented amount of money to work because investors had pulled back and he was going to take up the slack supporting credit.
The Fed chief would be aggressive and forthright. He said it was not a typical downturn. The virus, he said "is going to dictate the timetable" and he was not going to offer medical advice. That was to be left to the experts. But he would not let Covid-19 dictate the employment situation and the Fed would provide a bridge to be sure it did not.
"Today" host Savannah Guthrie pushed back several times about whether the Fed had the stamina to do it. There was moment when I looked at this man, confident in his purple tie, blue suit and white shirt, and I knew he meant it when he said, "We're not going to run out of ammunition. That doesn't happen," and I knew it was over.
That was it. Unlike all the sturm und drang of 2007 to 2008, when there were more forces trying to rein in government, more timidity, more worry about moral hazard, Powell just wasn't going to go down as the Federal Reserve chairman who let a pandemic defeat the American working person.
Guthrie noted that President Trump had recently tweeted that Powell was "clueless" and "slow moving." Powell simply said his job was to serve the American people in a "non-political, non-partisan" way. At least he had his job description right.
Right on cue, though, we got the worst weekly initial jobless claims on record, 3.28 million people, and the Dow dropped 400 points even as the Senate was agreeing to a $2 trillion package with stimulus checks soon to be in the mail for some pretty large sums and extended unemployment benefits for those who were losing their jobs.
By the end of the day the Dow had gone from a 21,427 low to 22,552 close, the S&P oscillator dropped to minus 7 and the decline was over. The Fed saved the day, something the workmanlike Powell assured. His timing was about as perfectly positive as hedge fund manager Bill Ackman's was perfectly negative the week before.
The $2 trillion bill got signed the next day and we've been going up ever since, led not by the professionals, but rather by a new group of, well, call them amateurs, young people who didn't seem to realize how closely we came to plunging in the abyss.
The Robinhood revolution actually began soon after with relentless spirited buying of many stocks of companies that seemed too cheap. I speak to so many of that cohort. They were as bullish as managers were bearish and they loved individual stocks, keying on, of all things, travel and leisure, but also anything fintech and tech itself.
They were bold; managers were timid. They weren't scared; the big strategists seemed terrified. The Wall Street managers, one by one, seemed to come out of the woodwork and suggest that while there would be many long months of bad, including retests and dire moments, we would come through. Even as the disease raged, though, there were no retests and no more dire moments, just one magnificent run back to new highs.
Was it the Fed's "fault" that we had a run all the way back? I pick my words carefully. Who cares? We needed the American people to get money. The stock market is a hazard that has to happen. We shouldn't confuse things. It's just ill-advised, a waste of time.
It's really too bad what happened to so many of the regular investors, so chastened. They were blown out by fear, including TV-mongered fear. Unlike 2000, they were the ones who were blown out, listening to their own kind. The younger people, I think they are here to stay, distracted periodically, like now, by a faux revolution against less clever fund managers of a short bent. They aren't going anywhere, though. They are like the people who came into this market when we first discovered stocks back in the early 1980s as tremendous wealth creators. They do research, they know how to invest, and if left to their own devises will discover more FANGs than any of us.
Good for them for not listening or heeding the false gods of money. They have their own way of doing things and, in many ways, it will be the way of the future: individual stocks, individual ideas, the hunt for the next Tesla (TSLA) or Apple (AAPL) or Netflix (NFLX) . More power to them.
(This is the final installment of Jim Cramer's "The Birth of a Market Bottom." If you missed any of the previous installments, you can read them by clicking on the links that follow to Part 1, Part 2 and Part 3.)
