If you are wondering what markets are doing and where they are going you are not the only one. Since the market lows this March, equity markets are on a tear. Record high unemployment? Bullish. Crashing GDP numbers? Bullish. Glimmer of a vaccine? Bullish. End of the lockdown? Bullish. Good news, bad news, it seems nothing is stopping this rally.

At the end of March major investment banks called the bottom of the bear market. Had there been enough selling? Or did they see that central banks and most noticeably the Fed would do everything in their power to stabilize markets? After all they had just thrown trillions of dollars in stimulus to calm things down and have vowed to support markets. Others argue that since markets are forward looking, the recovery indicates that investors are confident that the global economy will be resurgent by next year but that seems a bit presumptuous at this stage. It is interesting to also note that since the US lockdown almost 800k new trading accounts were opened and that trading stocks was among the most common uses for the government stimulus checks in nearly every income bracket. How much of this buying is done by speculating retail clients trying to make a quick buck?

It is clear that the rally is led by a handful of US tech stocks and which are pushing indices higher. The Nasdaq is almost in a V shaped recovery and is edging closer to its all-time high while some tech stocks have officially passed their all-time highs making them effectively virus proof. Or maybe it is just the face of the new economy? Maybe this crisis has just accelerated what we knew all along, that online technology would become essential to our everyday lives, whether we are free of our movements or locked down?

Even if we are in fact entering a new economic age, a number of noticeable investors recently called equity markets overvalued and are seeing similarities with the 2000 tech bubble. They also point out that without this unprecedented stimulus, equity markets would never have seen such a surge. Finally, there are a number of indicators such as dividend futures that are lagging and the banking sector has been left out of the rally which is historically not a good sign.

Whether you have bought into this rally or are sitting on the sidelines, it seems now is not the best time to add to your positions or take the plunge. The market rally has been so quick it is difficult to see where markets go from here. The positive wave sweeping the market is now clearly sentiment driven and Fear of Missing Out has set in. Any news that is likely to come out will be positive: vaccine testing, virus treatment, economies opening, lower unemployment rates. There also seems to be a feeling of a new normal about the virus and skepticism towards the measures taken to fight it. However, as the damage on the economy is assessed over the coming months and the new face of the global economy starts to emerge maybe fundamentals will take over and drive markets downward, leading to extreme fear of where we truly stand. The damage is real and you may have already personally experienced it or noticed it. Some segments of the economy will take a long time to recover and we may have a before and after Covid 19 for certain industries. How well or bad we emerge from these past few months of economic destruction and the short and long term impact it will have on the global economy will likely determine the battle between bulls and bears.