Stock markets have been fuelled by stimulus, particularly quantitative easing from the US Federal Reserve.
The move in markets since March has been extraordinary. The S&P 500, for example, is up 40% from the bottom of the March sell-off. The tech-heavy Nasdaq 100 is up by 45% and trading at its highest levels ever.
Many investors have looked on in amazement as the indices rose, in spite of the worst hit to the global economy in modern history. Some held back out of fears the rally would soon implode.
However, those fears have not yet come to pass and the Fed backstop has kept stocks rising and finance flowing.
Passive index trackers, which are now up 40% from March, are not the only worry for active managers.
Many amateur stock pickers trading through platforms like Robinhood have also done well from the rise in prices. Social media personalities such as Dave Portnoy, who posts stock tips as Davey Day Trader, appear to suggest that stock trading is easy and have made money at a time when big investors, most notably Warren Buffett, sat on their hands and bought nothing.
“I’m the captain now,” boasted Portnoy, dismissing the Oracle of Omaha as “washed up”.
Portnoy and his like will almost certainly face a market reckoning at some point and their track records suggest that Buffett is a better long-term manager of money. Nevertheless, the impression among many that stock picking is easy should be a worry for active managers finding it difficult to regularly beat the indices.
Active investors need an edge to prove they are still the best place for retail money. They may find one in the equity capital markets, where discounts on share placings and IPOs give investors a chance to secure returns unavailable to most retail players.
However, a bad choice of IPO can be seriously damaging to annual performance. Those who bought into Aston Martin's 2018 listing are still licking their wounds: the shares are trading 96% below their IPO price of £19.
The March sell-off should have given active managers a historic opportunity to buy stocks at the bottom of the market. However, many may have missed a buying opportunity when the market turned, and are still concerned that the rally will not survive the severe economic reality of Covid-19.
To buy or nor to buy, that is the question. It is one that is likely still haunting many equity investors clinging on to the hope that economic fundamentals still matter.