On Main Street there are a lot of problems.  There is record unemployment, police abuse, discrimination, and looting.  Things need to change.  At the same time Wall Street keeps rallying.  What’s with that? 

We often talk about Wall Street like it is a person.  Commentators say what Wall Street wants and describe its mood.  In reality it has no conscious, no heartbeat, and no feelings.  It is simply millions of individual investors trying to make their savings grow.  It is not a measure of social justice or the mood of the country.  It is people guessing whether future earnings will rise or fall.  With stocks up over 40 percent from the March 23 low, investors see things getting better, not worse.

Investors see an economy that is opening up, not closing down.  The record job losses will turn into record job growth.  That sounds better than it is.  Over the last ten years, the average monthly job growth was about 200,000.  That will easily be surpassed as some of the temporarily laid off workers are rehired.  Record hiring shouldn’t come as a surprise to anyone, but it will.

Hotel and airline reservations are rising, restaurant bookings are up, home prices are strong.  The number of homeowners seeking to delay mortgage payments peaked in April.  For the foreseeable future nearly all economic data will be improving as states open up more and more.  

Liquidity is also playing a large role in the market’s strength.  The money supply is going parabolic.  “Don’t fight the Fed” is the well-known saying.

While investors have been anticipating better days and correctly so, stocks are not cheap now.  That doesn't mean prices will plunge.  As long as interest rates stay at rock-bottom levels stock dividend yields will cushion the inevitable and periodic profit-taking.  Some insist that stocks are overvalued.  Yes, by historic measures (relative to operating earnings, book value, sales, growth rates) stocks are overvalued, but by one all-important measure they are a better value now than they've been in many decades.  That measure -- stock yields compared to bond yields.  

In this column I've often said that money has to go somewhere, and if not into stocks then where?  Cash?  Treasurys?  Real estate?  Commodities?  Bonds?  It’s not that investors don’t believe in social justice.  They have simply concluded that there is no alternative (TINA) to stocks.  They are buying and they will continue to buy until some other assets appear more attractive.  None have, yet.