Monday, May 25th, 2020

What Will Finally Stop the Stock Market Rally?


The US stock market rally has passed another milestone. It has been 487 days since a 5% correction making this the second longest such period since 1970. The point being that a measure of market strength and endurance is perhaps the length of time without a correction rather than just how strong the rally has been. CNBC writes how the market just passed a major milestone.

The S&P 500 just posted its second-longest streak ever without a 5 percent pullback, according to a new report from Deutsche Asset Management.

“What to make of the recent gains on Wall Street? One way to gauge the strength of the bull market is to ask how much the market has risen since the last correction. Another measure might be how much time has passed,” the firm wrote in a Friday report called, “Visualizing the second-longest uninterrupted bull market in Wall Street history.”

To reach its conclusion, the firm counted the number of calendar days between the Brexit referendum in late June 2016, when equities in the U.S. dropped by more than 5 percent, and Thursday’s market close. After 487 calendar days without such a decline, the current stretch of trading sessions without a 5 percent pullback “ranks now as the second-longest such episode since 1970.”

If the market does not experience a 5% correction by mid-December it will rank only behind the 1970 market in terms of endurance. With yet more proof of the strength of this market what will finally stop the stock market rally?

All Rallies Come to an End

Although the US stock market has climbed steadily over the decades it has also corrected and crashed. The point is that all rallies come to an end. What about this one? A hint of troubles to come may have arisen in the last couple of days. The reality show that is the Trump White House has provided fodder for talk shows and cable news. It has also failed to produce much promised legislation. Although congress is working toward a set of tax cuts there is not guarantee that Republicans will unite to effectively drive up the national debt. The other issue is that if the investigation about Russian tampering in the US electoral process comes closer to the White House all productive work in Washington could grind to a standstill. The most recent news is that Trumps former campaign chairman, Paul Manafort, has been indicted on federal charges relating to this work the Ukraine.

President Trump’s campaign chairman, Paul Manafort, was indicted Monday on charges that he funneled millions of dollars through overseas shell companies and used the money to buy luxury cars, real estate, antiques and expensive suits.

The charges against Mr. Manafort and his longtime associate Rick Gates represent a significant escalation in a special counsel investigation that has cast a shadow over Mr. Trump’s first year in office.

The two men appeared in the Federal District Court in Washington on Monday afternoon and pleaded “not guilty” to all charges.

This brings back memories of the Whitewater investigation, Monica Lewinsky and the Clinton impeachment. Will this be the loose cannon that finally stops the stock market rally?

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