Illustration: Aïda Amer/Axios

The S&P 500 closed at a new all-time high on Tuesday and has rallied by around 52% since hitting its low point on March 23 — the best run the index has ever had in such a short time.

The state of play: While the market has continued to rise for the past five months, most investors have been incredulous about the sustainability of gains.

What's happening: Data from the Investment Company Institute show equity funds continue to see outflows and bond funds continue to see inflows.

  • For the week ended Aug. 5, the last week for which data are available, investors pulled $20.3 billion out of equities and put $27.3 billion into bonds.
  • Equity funds have seen net outflows in every month this year and they have increased in recent months as stock prices have gone up — outflows in March, when the market crashed to its nadir were $25.6 billion, but rose to $45.1 billion in June and totaled $76.7 billion in July based on ICI weekly estimates.

Money market funds, which are ostensibly savings accounts, also have been stubbornly high in 2020 despite the booming market.

  • Investors have parked at least $4.5 trillion of cash in money markets since the week ending April 15.
  • That's about 50% more — $1.5 trillion — than MMFs held in April 2019 and an increase of more than $600 billion from the highest level of holdings following the global financial crisis.

What they're saying: "The S&P 500 has been impressive and has created a lot of wealth, but I am not sure that reflects the overall health of the economy," Patrick Leary, chief market strategist at Incapital, told Reuters.

  • "The rally has more to do with asset inflation, which is fueled by all the liquidity and all the continued support in the economy as well as the weakening dollar."

Yes, but: Some asset managers are starting to get bullish in public and in notes to their clients, encouraging stock buying.

Watch this space: Divergence continues to be a major theme in the stock market. Big U.S. tech stocks have led the way, with the Nasdaq up 22% year to date, setting new record highs for months.

  • U.S. equities continue to outperform the rest of the world with MSCI's index of global stocks excluding the U.S. down 4.7% year to date, compared to the S&P's 4.9% gain.

Go deeper

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Sep 24, 2020 - Economy & Business

The stock market's not-enough tantrum

Illustration: Eniola Odetunde/Axios

The market looks like it may be throwing another tantrum, investors say. But the cause is different this time around.

What's happening: This selloff is beginning to look like the 2013 taper tantrum, which roiled markets as U.S. government yields rose in response to an expected reduction of the Fed's quantitative easing (QE) program.

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Sep 24, 2020 - Economy & Business

The short-term economic impact of a Biden win

Illustration: Eniola Odetunde/Axios

We're 40 days away from the election, which means we're between 40 and 80 days away from knowing who won the election.

What happens next: The stock markets, which have spent most of 2020 divorced from the real economy, may tank — setting up a chain reaction that could impact everything from high-profile IPOs (e.g., Airbnb) to private market fundraising (denominator effect) to pending mergers (Delaware Chancery Courtnip).

Dion Rabouin, author of Markets
Sep 24, 2020 - Economy & Business

Citi: Racism cost U.S. economy $16 trillion

Photo Illustration by Omar Marques/SOPA Images/LightRocket via Getty Image

Since 2000, U.S. GDP has lost $16 trillion as a result of anti-Black discrimination, a new study from Citi global economist Dana Peterson and global chief economist Catherine Mann finds.

What they're saying: "The analysis in the report that follows shows that if four key racial gaps for Blacks — wages, education, housing, and investment — were closed 20 years ago, $16 trillion could have been added to the U.S. economy," Citi vice chairman Raymond J. McGuire says in the report.

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