Financial Industry Insights from Advisors Asset Management


AAM Viewpoints – Unusual Market Has Historical Fortitude

Stating the obvious, 2020 has not been a business-as-usual kind of year. Within months of its start it became a “year interrupted” by the global outbreak of COVID-19. That alone presented a massive challenge for the economy and potentially set a lasting course change for how business and daily life might be conducted for months and possibly years to come. If that were not enough for Main Street and Wall Street to grapple with, later came political turmoil and civil unrest which further weighed on the hearts and minds of Americans. Add to this, devastating hurricanes and wildfires. Astrologers even lamented two full moons in the month of October – historically, a volatility-challenged month for stocks. (One of the biggest daily declines occurred on a full moon in October 1989 – Friday the 13th!)

Observing and analyzing all of this in a vacuum, one might understandably conclude that some of these impacts would be potentially devastating for stocks. Not so, however, for this resilient market which managed to sidestep danger in March and blast to record levels by September. This is yet another showcasing of this unprecedented bull market cycle which has quickly and resoundingly emerged time and again from mathematically identified bear market territories in the face of a variety of threats in its 17-year run. Its unyielding tenacity may seem implausible to many; to this seasoned Wall Streeter, its many feats have placed it on a technical pedestal. 

The explanation is rooted in the very fundamentals of what drives stock prices – interest rates and earnings. Rates have always played a key role in basic market direction. Clearly, stocks have benefited from a low interest rate environment for years. Even before 2020 began, the Federal Reserve Board reiterated its dovish stance to reassure investors that interest rates would remain lower for the foreseeable future. More recently, the Fed doubled down on its forecast stating that it would not increase rates until there were definitive indications that reinflation efforts were successful. For all intents and purposes, this installed a higher valuation floor for equities. Corporate earnings are a significant factor for the stock market as well. Third quarter earnings are on track to produce the best comparisons of any quarterly period since Factset Research began recording this data in 2008. And, the earnings surprises have been propagated across diverse industry categories, not confined to any one sector or theme.

History has proven that interest rates and earnings matter – and these unprecedented last eight months are certainly a vivid illustration of this. History has also told us that the market is often most vibrant when it is anticipating something bigger and better on the horizon. If that proves to be the case, some of the brightest and most exciting days for stocks may be still ahead. An effective COVID-19 vaccine may be a substantive development that further brightens economic prospects in 2021.

CRN: 2020-1102-8690 R

The opinions and views of this commentary are that of Peroni Portfolio Advisors and are not necessarily that of Advisors Asset Management.

This commentary is for informational purposes only. All investments are subject to risk and past performance is no guarantee of future results. Please see the Disclosures webpage for additional risk information at commentary-disclosures. For additional commentary or financial resources, please visit



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