“Investors ended one of Wall Street’s wildest years on record by piling into everything from bitcoin to emerging markets, raising expectations that a powerful economic comeback will fuel even more gains,” WSJ writes.
Highlights From The “Everything Rally:”
- The S&P 500 reached record highs 33 times in 2020. It ended the year up 68% from its March lows.
- Government bond yields are near all-time lows, and corporate bond yields dropped too.
- U.S. crude-oil prices are back around $50-per-barrel after falling below $0 for the first time in April.
“After the eye-popping rise during a global pandemic highlighted confidence that central banks and governments would prop up the world economy, many investors now expect the delivery of vaccines to buoy markets.”
- “Gauges of sentiment from organizations including the American Association of Individual Investors show bearishness at multi-year lows.”
- “Meanwhile, tens of billions of dollars have recently plowed into exchange-traded and mutual funds that track stocks. Both of those trends have preceded past pullbacks, signaling excessive optimism to some cautious investors.”
- “Some are drawing parallels to the outsize gains late in 2017 and early 2018, before trade tensions and higher interest rates roiled markets.”
Looking Into The Crystal Ball:
- Analysts see potential obstacles, such as rising Covid-19 cases and the fallout from the Georgia Senate runoff election.
- But many still expect the ultralow interest rates to continue “supporting bonds while pushing investors to reach for higher-yielding assets.” With tech stocks at record highs, a lot of investors are reaching for “economically sensitive companies, commodities and shares of companies in emerging markets, all of which remain below their peaks.”
- “Their gains highlight optimism that the economy will boom in the second half of 2021, even if the next few months offer hurdles to the recovery.”
Justin Oh:
It looks like 2021 has started with stocks doing the opposite of rallying. We will remain cautious, especially when looking at high valuation growth companies.
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