We’re witnessing the most explosive stock market in history. We’re seeing a spectacular stock market rally.

We’ve witnessed the greatest 50-day rally in the history of the S&P 500. The S&P 500 has increased 37% over the past 50-days.

Ten weeks ago, March 23, 2020, the Dow dropped all the way to 18,591 points. The biggest gain ever in such a short timeframe. Today, June 4, 2020, the Dow Jones index has peaked above 26,274 points.

Why…T.I.N.A. (There is no alternative to stocks)

There are fewer publicly traded companies to invest in today than thirty years ago. In the 1990’s, there were about 8,000 companies listed on American stock exchanges. Today, there are about 4,000 publicly traded companies on American stock exchanges which represents a fifty percent cut.

Furthermore, there are fewer shares of company stocks available to be traded. Share buy-backs by U.S. companies have taken 20% of companies’ shares off the market.

Essentially, the number of available shares have been dramatically cut, yet the demand for share have been vastly increased the demand for shares. The market is awash in cash from the Federal Reserve loose monetary policy and trillions of dollars from 401K plans.

Economics 101 reveals that cutting the supply of stocks while increasing the demand for stocks cause the price of stocks to go up.

And don’t forget about investor psychology, the economy has entered the return to work phase and the economy is on the move again. Animal Spirits are on the rise again.

Regarding the S&P 500 index, 159 stocks in the index are up for the year an average of 13% / 350 are down year-to-date an average of 20%. And, there are $4 trillion still sitting on the sidelines in money market accounts.

FOMO (Fear of missing out)

Fear of missing out can be extremely expensive. When the equity market has explosive moves where it goes up this high and this fast, an investor can feel that they’re “being left out and left behind”. As a result, they start paying top dollar for expensive and overbought stocks. That is no longer investing…investors are buying high hoping for higher.

Sources: CNBC and Fox Business News