The stockmarket rally has found a ceiling
On Monday America’s S&P 500 stockmarket index entered positive territory for the year, before falling back. This rally may have found its top.

Who says markets are rational? asks John Authers on Bloomberg. Academics tell us that the market dispassionately crunches data to determine prices, but psychology still matters. On Monday America’s S&P 500 broke through the level at which it started the year before falling back. Whenever stocks enter positive territory for a year that has seen so much go wrong, even market bulls seem to start looking “for reasons to sell”. This rally may have found a “hard ceiling”.
This week saw the start of the US second quarter earnings season, giving investors an opportunity to gauge the damage wrought by lockdowns, says Michael Wursthorn in The Wall Street Journal. Analysts expect S&P 500 earnings to have fallen by 45% on a year before.
The V-shaped recovery has legs...
This earnings season might actually help stocks, says Andrew Sheets of Morgan Stanley. Many companies will report that activity has picked back up since the trough in March, showing that the worst is behind us and we are now back in recovery mode. We don’t think markets have got carried away either: if they thought that we were heading for a painless recovery then small and cyclical stocks would be doing a lot better than they are.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The reality is that “even a V-shaped recovery takes time”: we think it will be 18 months before growth in developed markets returns to normal. The V-shaped recovery still has legs, agrees Jim O’Neill on Project Syndicate. Government responses to the pandemic have “vastly exceeded” the post-2008 effort and rising savings rates could lead to a consumer boom. Key global indicators such as US employment, European and Asian purchasing managers’ surveys and South Korean exports have all improved markedly over the past two months.
Optimists hope that profits will follow the same pattern, writes Michael Mackenzie in the Financial Times. The rebound will not happen in a single quarter, but bullish analysts expect profits to jump by more than 28% next year as they recover ground lost to the pandemic.
... but longer-term problems pile up
Wall Street analysts are a “perennially optimistic” bunch, but the challenges are mounting, says Mackenzie. The latest Covid-19 spikes are a reminder that the virus has not gone away. In the longer term, governments will need to pay for the vast debt loads accumulated during the health crisis. That is likely to mean higher taxes on business. Michael Arone of State Street Global Advisors calculates that a full reversal of America’s 2018 tax cuts would deal a 7%-8% hit to S&P 500 earnings.
The high-tax scenario is looking increasingly likely. Donald Trump’s poor pandemic response means he will need “something close to a miracle” to be re-elected, says Jeremy Warner in The Daily Telegraph. A weakened president will be tempted to engage in sabre-rattling. The US and China squared off over the South China Sea this week – hardly propitious for global trade. Yet soothed by central banks’ monetary stimulus, “equity markets sail blithely on, apparently oblivious to the darkening clouds around the
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
-
Michelin Key Hotels 2025: the top destinations in the world
The Michelin Keys have been awarded to spectacular hotels across the world. From Marlon Brando's private resort in Polynesia to a Bvlgari hotel in Tokyo, we look at some of the most extraordinary stays in 2025
-
MoneyWeek news quiz: How much could you get in car finance compensation?
The car finance scandal, inheritance tax, and house prices all made headlines over the past few days. Test your knowledge while reviewing this week’s top stories with MoneyWeek’s news quiz
-
The private equity puzzle
Listed private equity trusts still trade at large discounts, despite sales that validate their valuations
-
Why investors should avoid market monomania
Opinion Today’s overwhelming focus on US markets leaves investors guessing about opportunities and risks elsewhere
-
Can Rachel Reeves save the City?
Opinion Chancellor Rachel Reeves is mulling a tax cut, which would be welcome – but it’s nowhere near enough, says Matthew Lynn
-
Pierre-Édouard Stérin wants to make France great again
Conservative billionaire Pierre-Édouard Stérin is seeking to lead a political and spiritual renaissance across the Channel. The planning looks meticulous
-
Global investors have overlooked the top innovators in emerging markets
Opinion Carlos Hardenberg, portfolio manager, Mobius Investment Trust, highlights three emerging market stocks where he’d put his money
-
Pinewood Technologies: a drive for growth
Pinewood Technologies’ platform is one of the best in the business. Investors should buy in
-
'EV maker Faraday Future will crash'
Faraday Future Intelligent Electric is failing dismally to live up to its name, says Matthew Partridge
-
Investors should cheer the coming nuclear summer
The US and UK have agreed a groundbreaking deal on nuclear power, and the sector is seeing a surge in interest from around the world. Here's how you can profit