Excitement over vaccine progress and extremely strong earnings pushed stocks higher last week in spite of record new COVID-19 cases and hospitalizations.
Small caps make new highs
It took more than two years, but small caps finally made new all-time highs, with the Russell 2000 Index closing at its first new high since August 2018. This ended one of the longest streaks ever without a new high. Data shows that future returns after long periods without new highs have been quite strong.
With positive vaccine news and new stock market highs, we are seeing some potential warning signs, such as sentiment getting excited. When we upped our view on stocks in late March 2020, virtually no one was bullish, but now things are a little more crowded. Various flows and sentiment polls are flashing levels of warning, and a well-deserved break after a huge rally in November would be perfectly normal.
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All index data is from FactSet.
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