More on the “Rally in Crap”

In the newsletter from a few weeks ago, I described the rally as being the rally in crap. At Bloomberg, Sarah Ponczek gives more background.

Rather than cave under the prospect of higher interest rates, a basket of companies with shaky finances fell 0.9%, while a similar group of stocks with sturdier balance sheets dropped 3.4% and the S&P 500 ended the week 2.5% lower, data compiled by Goldman Sachs Group Inc. and Bloomberg show.

In February, companies with weaker finances outperformed more solid ones by more than five percentage points. That was the third-best performance since May 2009 (the strongest month was last November after the election and positive vaccine news, while the second was in 2010). On a quarterly basis, the start of 2021 coupled with the last three months of 2020 is shaping up to be the best period for firms with weaker balance sheets in more than a decade.

Back then, companies with more fragile finances led the first big chapter of the stock upswing. The group’s bottom versus their relatively stronger counterparts came in March 2009 — coinciding with an end of the bear market in equities and arriving three months before the onset of an economic expansion that eventually lasted almost 11 years.

Posted by on March 1st, 2021 at 3:44 pm


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