S&P, Nasdaq Posture At All-Time-Highs: What's Holding Them Back?

Global stock markets remain strongly bid as hopes for a coronavirus vaccine drive prospects of a stronger recovery in 2021. This as at least somewhat offset by the near-term item of rising coronavirus cases, hospitalizations and deaths that’s being seen in many different spots in the Western World. Here in New York, we’re seeing more restrictions by the day and fear remains of a broader-based lockdown should current measures not take effect. But, that bad news has seemed to matter little as the longer-term projection appears to be more bright: And there’s a possible light at the end of the tunnel for some point in 2021.

There’s another item of concern and this may be a more pressing matter, at least for now, in US equity markets, and that’s the potential for another stimulus deal.

Markets have continued to rally through the past eight months of the pandemic largely because of outsized governmental support. Some of this support is set to expire at the end of the year; and should Congress fail to come to a deal on that next stimulus package, we could see some actual economic destruction beginning to filter-through from that failure.

There’s little expectation that a deal won’t inevitably happen: The bigger matter is one of size, and this is where the political volleyball comes into play. With the GOP retaining the Senate, the Republican party continues to have a significant say in how that stimulus deal is ultimately built. The Democrats, controlling both the House and, as of next year, the White House, want to see a larger deal than what Republicans are willing to sign off on. There seems little in-play that can break that impasse, at least for now, and this is likely what’s holding stocks back from breaking out to fresh all-time-highs, even with multiple covid vaccines now in-play.

In the Nasdaq 100, the leader of US equity indices from the March low into September trade, prices have pushed right back to the prior September high, taken from around the 12,466 level. We did see a bit of penetration above this price yesterday, albeit temporarily, after which prices pushed right back to that level.

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