Why the Stock Market is Up During a Pandemic

First, full disclosure, I am NOT a professional financial analyst (although I have an Economics degree) but this is not my “profession”.

However, I do have common sense and I look at the World with a broader (Macro) view.

I see a lot of confusion as to:

“How is the stock market up during a pandemic?”

This article explains it very well:

Indexes like the S&P 500 are regularly culling stocks (companies) that aren’t performing to their standards and adding new stocks (companies) that are performing well.

It’s why buying an Index ETF is such common advice. The culling of bad performers and addition of good performers is already built-into the index.

(***Don’t make the mistake thinking there’s no risks in Index ETF’s, it’s just spread out more vs individual stocks).

Tech Darlings:

So,why is the S&P 500 doing relatively well during this pandemic?

Just look at the what makes up the S&P 500 and you’ll see it’s dominated by the top five tech companies of Apple, Microsoft, Facebook, Amazon, Alphabet (parent of Google) which currently make up 17.5% of the index.

The big five tech giants are relatively unscathed (not completely unharmed) from the pandemic.

Even in bad economic times…

The thing to remember is, not all businesses suffer during tough economic times. 

There are (and always will be) companies who thrive in an environment when most others are suffering.

It’s why the savvy investors ensure they have cash on hand to take advantage of fundamentally good companies who are under-valued during a tough economic period.

One of my mantra’s is:

“You make money when you buy right.” 

That goes for stocks, real estate and any other investment.

Warning:

This is not a “greenlight” telling you to invest in the market. The goal is to try to explain why we’re seeing the major stock indexes perform the way they are during a pandemic when logic would have it perform poorly.