Despite record-setting COVID-19 infections, American equities rose today. All major indices gained ground during regular trading, while tech stocks did even better.

The Nasdaq Composite set new 52-week and all-time highs, touching 10,462.0 points before closing at 10,433.65, up 2.21% on the day. Similarly, a basket of SaaS and cloud companies that has risen and fallen more sharply than even the tech-heavy Nasdaq closed this afternoon at 1,908.30 after touching 1,952.39 points. Both results were 52-week and all-time highs.

Such is the mood on Wall Street regarding the health of technology companies. It’s not hard to find bullish sentiment, jockeying to push tech shares higher. Some examples of today’s enthusiasm paint the picture:

The recent IPO for Lemonade is now worth $4.7 billion, according to Yahoo Finance. That price gives it a Q1-annualized revenue run rate multiple of around 45x. For a SaaS company, that would boggle the mind. As we’ve written, however, Lemonade has very un-SaaS-like gross margins, and has higher churn. The company’s stock rose around 17% today for no clear reason.
Tesla rose over 13% today to $1,371.58 per share, another huge day of gains for the company now worth in excess of $250 billion. Analysts expect the firm to report $4.83 billion in revenue in its most recent quarter, according to Yahoo Finance. That’s less than the company reported in its year-ago June quarter when it saw $6.35 billion in revenue. Since July 1, 2019, Tesla shares have appreciated in excess of 450%, despite the company prepping to report what the market anticipates will be revenue declines.
Amazon and Netflix also set new records today to toss a few more names into the mix.

You can’t swing your arms without running into a reason why it makes sense for SaaS stocks to be trading at record valuation multiples, or why one company or another is actually reasonably valued over a long-enough time horizon.

It’s worth noting that this putatively rational public investor thinking doesn’t fit at all with what the tech set used to pound into my head about the public markets, namely that they are infamously impatient and thus utter bilge for most long-term value creation. Going public was garbage, I was told; you have to report every three months and no one looks out a few years.

Now, I’m being told by roughly the same people that the market is doing the very thing that they said it didn’t do, namely price firms for future results instead of trailing outcomes. Fine by me either way, frankly, but I’d like to know which story is true.

Happily, we’re about to see if all this high-fiving and enthusiasm is real.

Earnings season beckons, and it should bring with it a dose or two of clarity. If the digital transformation has managed to accelerate sufficiently that most tech companies have managed to greatly boost their near-term value, hats off to the cohort and bully for the startups that must also be enjoying similar revenue upswells.

But that doesn’t have to happen. There are possible earnings result sets that can cause investors to dump tech shares, as Slack learned a month ago.

The background to all of this is that there are good reasons to have some doubts about the current health of the national economy. And, sure, most people are willing to allow that the stock market and the aggregate domestic economy are not perfectly linked — this is no less than partially true — but each day the stock market steps higher and COVID-19 surges again leading to re-closings around the nation makes you to wonder if this is all for real.

Earnings season is here soon. Let’s find out.