Yahoo Finance Is It Time For The Equity Market To Sober Up?
The market isn’t as efficient as many would allude that algos and HFTs have made it. The democratization of the financial markets, ultra-low interest rate, and high future growth environment have created a new market that freshman and senior traders are both learning.
Retail investors have caught Wall Street off guard with the Big Short-Squeeze on some of the most shorted names in the market, like GameStop GME, AMC AMC, and Bed Bath & Beyond BBBY. The new cohort of r/wallstreetbets traders are proving to the world of high finance that retail investors/traders are a force to be reckoned with.
Market fundamentals and valuations have seemingly been thrown out the window (at least in the short-term). I don’t think this market euphoria can last much longer. Many retail investors have been temporarily scared out of stocks by the much-expected capitulation of GME, AMC, and BBBY, with many of these new high-risk traders not having the word sell in their lexicon.
We have traded effectively sideways since big tech earnings kicked off two weeks ago. We had tremendous results from the biggest and baddest tech giants, but the markets seemed to have more than priced in earnings beats from market-moving innovative giants like Apple AAPL, Microsoft MSFT, and Amazon AMZN.
Traders were buying the rumors of good earnings expectations, and when these great earnings came to fruition, they sold the news. The markets are looking toppy from every angle. It appears that all of the optimism is already baked in. I expect to see a 10-15% pullback in the coming weeks/months.
Like the famous John Maynard Keynes said, “the markets can remain irrational longer than you can remain solvent.” Don’t try to time the correction, but be cautious with your market purchases.
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