2020 is a year to remember – from all points of view. To start with, it is the year the world has seen a pandemic. That changed everything from the start, as there is no precedent in recent history to use as a benchmark.
Next, Brexit is supposed to have its resolution at the end of this year. For more than four years now, investors have watched from the sidelines the divorce settlement between the United Kingdom and the European Union. Also, this is an election year in the United States. If that is not enough, fires ravage California at this very moment, unemployment is high around the world, and most countries are in a deep economic recession.
Do I get your attention now?
One Bright Spot – The U.S. Stock Market
Out of everything mentioned earlier, one bright spot stands out of the crowd – the stock market. After a sharp and violent decline in March, the stock market bounced to new all-time highs. Or, close to them.
This is good news, make no mistake. The stock market is a leading indicator of economic health, and technicians consider that it reflects economic reality with a six-month lag. Hence, we are on the right track if we are to use the stock market performance as a sign that everything will get back to normal.
However, 2020 brought some interesting developments, or curiosities, on the stock market. It is worth mentioning only to remember us from time to time how crowds react and how the investing world spins.
Tesla, the electric car manufacturer, is up over six hundred percent this year. Its market capitalization exceeds the one of most of its competitors combined – yet it manufactures only a fraction of cars in comparison.
Nikola, an electric truck manufacturer, has yet to deliver one single truck. It has no factory and no supply chain. The company is worth ten billion dollars and will use the General Motors’ platform to build a truck that – attention again! – has not been revealed yet.
Hertz, the car renting giant, declared bankruptcy. However, the news did not scare investors that piled on the company’s stock and forced the company to consider issuing new shares. The prospect sent to the SEC clearly stated that investors stand to lose all their money, should they choose to invest in the new shares. Yet, it applied for permission to issue millions of shares. Luckily, the SEC denied the request.
Stories like these will continue to appear. They represent the wild side of the market – and a funny one, if only we would not talk about real money.