Eyes on the Future

Mike Zaccardi, 1:16 pm ET

ALL EYES ON FRIDAY were focused on Federal Reserve Chair Jerome Powell. “Will Powell announce an aggressive taper plan?” many market-watchers wondered. Not a whole lot new was presented, and that triggered a stock market rally. The S&P 500 notched its 52nd all-time high of 2021 and the Russell 2000 small-cap index had one of its best days of the year.

Small caps got off to a hot start in 2021. By mid-March, the Russell 2000 was up 19% on the year, while the S&P 500 was higher by just 5%. Mega-caps then resumed their near monopoly on investors’ enthusiasm, as the theme of a “reopening” economy petered out.

The reopening versus stay-at-home story can be seen in the stock market performance of Zoom Video Communications (symbol: ZM). The stock ranged from $60 to $110 before the pandemic. But when the world changed in mid-March 2020, Zoom surged. That made sense, given that much of the corporate and academic world was making a swift shift to online operations.

Zoom peaked last October at $588 per share. Back then, it felt as if the stock could do no wrong. The entire world was using Zoom’s platform and it appeared virtual meetings were here to stay. But, alas, it was an awful time to buy the stock. If you held it through today, you’d be down more than 40% from the high 10 months ago.

Zoom bottomed three months ago at $273, weeks before the Delta variant started hogging frontpage headlines. As often happens, it seems the financial markets had an inkling another shoe was about to drop—and investors started bidding up Zoom’s share price, which peaked most recently in early August.

Since then, the stock has fallen back 15% from its early August high. What’s going on? As investors look ahead—which is what they always do—perhaps they’re starting to discount the Delta variant and focus on better times ahead. Indeed, the market often discounts news quickly. Own individual stocks? Keep in mind that when a company becomes a Wall Street darling, that’s often the time to take profits.

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