Why Aren’t Stocks Down More?

26 million people are unemployed and the economy is at a stand still.

And yet stocks down just 17% from their highs, and down less than 1% year-over-year.

What is going on?

Three things:

  1. Fed liquidity and fiscal stimulus are going a long way
  2. Remember, stocks fell 35%. Not nothing.
  3. The S&P 500 is not representative of the broader economy

I want to focus on the third point. The S&P 500 is doing well, but many stocks are not.

The pain that retail companies are experiencing is being reflected in their stocks. Nordstrom and The Gap are both down 60%, Macy’s and Bed & Bath are both down 70%. That’s year-to-date, and to remind you it’s only the second quarter.

The pain that hotels are experiencing is being reflected in their stocks. Marriott and Hyatt are both down more than 40%.

The pain that casinos are experiencing is being reflected in their stocks. MGM and Wynn are both down more than 50%.

The pain that energy companies are experiencing is being reflected in their stocks. Halliburton and Apache are both down more than 60%.

The pain that home builders are experiencing is being reflected in their stocks. PulteGroup is down 47% and Toll Brothers is down 57%.

If you’re looking at the S&P 500 and shaking your head, you’re not alone. But you have to remind yourself that the market is working. The winners are being separated from the losers. The good thing about cap-weighted indexes is it sorts it all out for you without you having to do it on your own.

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