Despite all the unprecedented occasions and accidental consequences of the following year, current market situations rhyme greatly with those of mid-February 2020, when stocks peaked just before Covid’s collapse.
In the six months leading up to the index on February 19, 2020, the S
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Much of the discussion around the market site is also similar: the concern that much of the market place is governed by a few massively expanding stocks (the first five S shares
At that moment, as now, the S
The spread of high-yield bonds has circulated almost perfectly over the next year, at incredibly low levels, consistent with the feeling that the benefiting credit markets are lubricating the economy and markets.
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This is how this capital asset from the cancellation of debt capital markets was characterized in this column a year ago this weekend:
“Genuine yields on quality corporate bonds are slightly above zero. The Chicago Fed’s National Financial Conditions Index shows that the liquidity environment is as flexible as this cycle has been. . . A transparent majority of S shares
All this is also true today. And the same goes for febrile shopping in a handful of beloved “history stocks” that excite younger, more competitive investors while making traditionalists a little nervous.
A year ago: “An organization of what might be called ‘idiosyncratic speculative growth’ actions is also acting fairly hastily this year, a sign that investors are aggressively preparing for the next big thing (or perhaps just the next fast dollar). “Then, Tesla, Beyond Meat and Virgin Galactic. Today, there are dozens of names, from GameStop to Canadian hashish, fuel cells and fintech commissioning applications.
Therefore, echoes are transparent in the run-up to this anniversary. However, the differences are multiple, vital and make the existing market more dynamic in a way that is favorable and, potentially, in all likelihood, dangerous.
Let us be transparent in the sense that observing the similar trend in market locations is now not remote to expect something resembling a repeat of the collapse of the market site and the economic calamity that began to occur in late February last year. The global economic close forced an unprecedented first five-week fall, 35%.
Which brings us to some of the very important maximum differences between now and a year ago. The collapse has resetted the economic cycle clock and political orientations. From 2019 to 2020, Wall Street was stationed at an end-of-cycle vigil. , with an economy close to the peak of employment, the flat Treasury rate curve, the profit margins of companies near the peak, profits remain stable.
The Fed suspended indefinitely in February 2020 at short rates of 1. 5 to 1. 75%, but a significant minority of Fed officials expected a rate increase in 2021.
The sudden recession and the collapse of profits have caused about $5 trillion in a deficit-financed budget more likely, and have simplified the Fed’s maximum for a long time, we decided to wait for a return to complete employment and a sustained build-up in any tightening movement.
So, yes, valuations are higher now and investor expectations can be unrealistic.
But Corporate America has refinanced for years at attractive rates opposed to a Fed protection network, profits will again be above its previous peak this year, the government is eager to make the economy warm and (likely) lawmakers have executed a repeatable procedure to reduce . -circuit of a recession.
Another thing they have replaced in a year is the leak ahead of small investors in the market, feeling invincible after going through the crash and recording an uptick of almost 80% in the S
The willingness of investors to increase bets in the form of call functions in unprecedented volumes and instant accumulation in new IPO such as DoorDash, Snowflake and AirBNB at tens of billions of market prices at multiples of giant profits. Tolerant philosophy for the band.
Some of this power was already beginning a year ago, but it hadn’t gained as much momentum or gone so viral. The Russell Micro-Cap index has risen 65% in three and a half months. Penny inventory volumes have been more quintupliplicated. In general, trading volumes are expanding even with the recovery of indices, the opposite of the typical trend and reminiscent of a trend similar to that of the vanquished 1990s. Last week’s inventory entries set a new record.
Social media pushes reduced GameStop shares from $12 to $400 to $52 over the next two months, then raised Tilray from $18 to $63 to $29 in two weeks. Meanwhile, the volumes of ETFs S
All this litany describing the undoed animal spirits that cross Wall Street says it is a hard and well-sponsored bull market and that the dangers of wild overtaking are increasing. Sometimes.
The fact that Reddit’s stock subsectors and capricious green energy games are exaggerated and then drilled without damaging the high capitalization rates say they are dangerous?Or the fact that a few days of abrupt acquisition of small short-term shares at the end of the month triggered an immediate spill of 4% of the S
A year ago, Bank of America’s global strata, Michael Hartnett, told investors to keep playing with strong assets “until investors are more obviously ‘euphoric’, which, he said, will mark the moment of ‘maximum positioning and maximum liquidity’. “Hartnett argues that even look now, his Bull indicator
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All this goes back to the idea launched here in early January that 2021 presents as a new combination of 2010 and 1999: the first full year of a new bull market covering lasting recovery forces, combined with the last year of a hard bull. . market that exploded in all emerging targets and created degrees of excess that took a few years to decrease.
Interestingly, however, the center of the market captured through the S
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