by Michael Pento, Market Oracle:
A few days ago the market was crashing on Coronavirus fears. But recently, the market has soared back based upon the hopes of a vaccine and some better than expected economic data in the US. The ADP January employment report showed that a net 291k jobs were created, and the ISM Services Index came in at a healthy 55.5. However, a couple of good data points doesn’t change the fact that US economic growth has contracted back to 2% trend growth and will absolutely become more anemic–at least in the short-term. This is because the measures needed to contain the virus are also GDP killers. I have no clue if the virus will become a pandemic or if it will fade away like the SARS and MERS viruses–without long-term economic damage. But, for the stock market to remain at record high valuations, nearly everything has to go perfectly. That is, the Fed has to keep pumping in money, and EPS growth must rebound sharply.