Investors found themselves in a familiar, but perhaps frustrating spot Thursday. Waiting with bated breath — yet again — for the end of the 2020 bear market and the start of a new bull era.
Wall Street has for days watched the S&P 500 tick toward, flirt with, and briefly overtake its record close from Feb. 19.
But the broad market index simply hasn't been able to hold those levels long enough to cement a new record, to finally put an end to the coronavirus-inspired sell-off that sent the S&P 500 reeling more than 30% back in March.
The latest example came on Thursday, when the S&P 500 traded about 3,386.15 — its record close — only to shy away minutes later.
Explanations for the S&P's inability to hold record levels centers on a division both in what investors see in the months ahead and in the stocks they favor as a result.
"It's a commitment issue," says Quincy Krosby, chief market strategist at Prudential Financial.
The market is "focused on the economy, the trajectory of the economy. And so far, the market has been doing very well ... based on a 'less bad, that's good'" philosophy, she said. "If [the data is] less bad, that's good. But what may be necessary to climb over and maintain the new highs is evidence that the trajectory is increasingly strong and positive."
One group of investors, which espouses a more upbeat outlook for the U.S. economy, looks at the recent improvement in employment and inflation data and concludes that the nation is firmly (albeit slowly) on the path toward positive growth an recovery.
Reports like the Labor Department's first jobless report since March with initial unemployment claims under 1 million inspire this group to leave the lofty valuations of Big Tech in favor of cyclical names like JPMorgan Chase, Boeing and Exxon Mobil.
The other camp, generally more conservative on the Covid-19 outlook, fears that Wall Street may be too upbeat in its expected vaccine timeline and continues to enjoy the reliable revenue provided by Amazon, Netflix and Facebook.
Krosby used Caterpillar as an example.
Despite a 31% decline in second-quarter revenues, the global equipment and machinery manufacturer has climbed more than 6% this month, far ahead of Amazon's 0.6% and Facebook's 2.9% advances.
But in the absence of blockbuster earnings results, Krosby said the newfound strength in a cyclical stock like Caterpillar comes from a growing sense among some investors that the global economy is healing.
A sense that Caterpillar's third- and fourth-quarter results will show material improvement.
"You saw Caterpillar the other day climbing, climbing. And yet we know from CAT's numbers that they didn't do well in the U.S. But they did well in Asia," she said. "That happens to be one of those areas that has been, in the past, indicative of an important and material change in the global economy."
But Wall Street is far from certain about any one path forward for the U.S. economy, especially with a wide range of vaccine candidates and what's expected to be another tight presidential election in the U.S.
That's why there's a tug-of-war behavior between the safety of Big Tech and a more optimistic bet that economically sensitive stocks like Caterpillar.
"The broadening of the economy — the broadening — it's intermittent," Krosby said. "One day, you know, you'll have the Russell small-caps doing well, you'll have materials doing well, you'll have energy and financials [doing well]. And then everyone gets scared, and then the march goes right back to those that have led this market higher."
That division is clear even when comparing two broad sectors like financials — a more cyclical sector — and technology.
Of the eight trading days in August, S&P financials and technology stocks have only posted two days of trading in the same direction. The last five, through Wednesday's close, have all diverged.
"The market has to make a decision as to whether or not it sees the economic trajectory on a solid pace towards going from 'less bad' to 'good,'" Krosby said.
Perhaps the most important factor in modeling an economic outlook in the current climate is a Covid-19 vaccine, the strategist said.
Positive Phase Three results from one of the several companies working on a vaccine (Pfizer, AstraZeneca, Johnson & Johnson) in the next few months could be the key to a decisive move higher in the S&P 500.
Until that time, or an even-larger-than-expected fiscal package, markets may be in for contained trading, according to Evercore ISI's Dennis Debusschere.
"A fiscal 4 package and vaccine development are critical to driving economic uncertainty lower and value higher," DeBusschere, an Evercore strategist, wrote on Monday. "Until then, value will benefit somewhat from lower case growth and further rotations between risk-on and off factors should be expected."
Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.