Volatility is our companion again.
Value stocks are outperforming, and the Nasdaq is plunging one day and reversing the next. The bond market is making lower lows and lower highs. While it seems to be plumbing for a bottom, one isn't evident yet.
Investors are engaging in an old mistake: they are looking to history for similar patterns and experience by which the current market and economic environment can be understood and from which reliable projections can be made.
But while market and economic patterns generally tend to repeat, it sometimes is no longer reasonable to rely on those expectations when inputs change dramatically. To wit: the U.S. economy was supported by about $6.3 trillion in "stimulus" in 2020, which includes about $3.1 trillion in deficit spending and a $3.2 trillion increase in the size of the Fed's balance sheet.
Congress has already authorized an additional $1.9 trillion in economic support so far in 2021. Together with the $900 billion authorized in December of last year, a total of $2.8 trillion has now been authorized in the past 90 days. That's 13% of the entire U.S. gross domestic product in a single quarter.