(New York)

The wild market over the last four months has caused a lot of elation and anxiety among investors. It has also caused a rethink of what kind of recovery we may be experiencing. Almost everyone thought we would have a V- or U-shaped recovery, but the way things are shaking out, it looks like we may have a “k-shaped” recovery. What this means is that almost all companies took a big dive at the start of the pandemic. However, after that point the fortunes of certain sectors have diverged markedly, forming a “k” shape to the market recovery. IT, consumer discretionary, and communication services have been the big winners, while energy, financials, utilities, and real estate have suffered.

FINSUM: So the interesting question here is the degree to which the market recovery might end up mirroring the economy’s recovery. So far the patterns make sense.

(New York)

You know the saying “a rising tide lifts all boats”? It couldn’t be further from the truth as it concerns the current stock market. The S&P 500 is just about flat, yet if you take a close look, 337 of its component stocks are down. The index is only being held up by a 1% gain from Apple and minor gains from the other 4 stocks that comprise 20% of its entire value. The lack of breadth has been a consistent feature of the recovery over the last several months.

FINSUM: Investors are not expressing any degree of bullishness about the economy, which would be reflected in breadth. Frankly, all the recent gains seem to be simple momentum bets on a small handful of stocks, making the whole recovery feel hollow.

(New York)

For the last few weeks the market has had somewhat of a respite from the constant stream of vaccine-related market yo-yoing. However, it looks like it is going to start again as several COVID vaccines are reaching a critical stage of testing. Multiple vaccines, one from Pfizer, are entering phase 3 of their trials and some anecdotal evidence says Pfizer’s version is getting better. Johnson & Johnson has a vaccine in a similar position. Markets have shown significant volatility in the past when news about vaccine trials has been released.

FINSUM: The economic implications of a successful COVID vaccine are monumental, so expect significant volatility on material vaccine news, especially as these vaccine trials enter later stages.

(San Francisco)

Even the most die-hard Apple investor must be feeling a little woozy right now. The company’s market cap just surpassed $2 tn. And guess what—half of that came in the last five months. Yes, the company doubled in value since the start of the pandemic and is now worth $2 tn! A couple months ago many were saying Apple was a bargain, now it seems to have a very significant premium. So the big question for investors—is it time to cash out because things feel very toppy, or do you stick with it? The company’s earnings have been phenomenal. So good in fact that Goldman made a blunt comment about flubbing its forecasts, saying “It turns out that we and consensus weren't even in the ballpark in terms of what was possible.”

FINSUM: $2 tn is a scary number, but it feels like it would be wise to stick with Apple right now. Momentum is good and there does not seem to be a big headwind that would wound the stock.

(New York)

High yield stocks have been wounded during the pandemic. The 100 worst performing S&P 500 stocks since the pandemic began have returned minus 39% and yield an average of 3.07%; the top 100 have returned over 35% and yield just 0.85%. However, now might be the time to buy in as there are some exceptional values. The core idea is that many of these wounded names are going to be bid up over the next several months as yield-starved investors try to find some income.

FINSUM: Right now it is very important to be selective about dividend stocks, as their returns are all over the map. For example, the Vanguard Dividend Appreciation ETF (VIG) has returned 4% this year, while the iShares Select Dividend ETF has returned minus 18%! The reason why is that the latter was weighted towards utilities and financials, which have suffered. Be careful what you choose!