Bubblicious
By Fri, Mar 27, 2020
Hey Scoopers,
Even a significant jump in the jobless claims couldn’t ruin investors’ excitement about the trillion-dollar stimulus cheque that the government wrote for the economy. – more on that in the “Overall Market” section.
Beyond the overall market, one in-person entertainment stock has been on the shopping list of investors while another in-person retail stock is falling out of favor even with deep discounting. — more on that in the “What’s Up?” and “What’s Down?” sections.
Oh, by the way, what’s your plan in response to the recent rapid recovery? — more on that in the “Water Cooler” section.
But, first, here is a recap of what happened in the market yesterday:
Market Recap
- U.S. markets: All three indices finished Thursday with a big jump and in the green. Scroll down to the “Overall Market” section to read more.
- Cryptocurrency: Bitcoin’s price continued in the mid $6,000 range. The cryptocurrency’s status as a safe haven is being ridiculed as the Bitcoin price is moving similar to the stock market.
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Bubblicous
The stock market jump on Thursday is even surprising to our optimistic good nature. The number of coronavirus cases in the U.S. just took over China. Some of the country’s largest employers such as GM (Ticker: GM) have stopped their production indefinitely. And, more than 3 million people just told us that they have lost their jobs. Why did the stock market jump on Thursday? It’s almost as if we are having a bubble in the middle of a market crash. Bubblicious …
Who Knows Why?
So, what happened?
Shares of Dave & Buster’s (Ticker: PLAY) were up more than 19% on Thursday. We all know that the social distancing trend will have an impact on the revenue of Dave & Buster’s. However, the stock price has been going up for a few days, without no one knowing why. The best hypothesis is that investors are buying the dip, perhaps even irrationally.
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Discounting Is Not Working Anymore.
So, what happened?
Shares of Macy’s (Ticker: M) were down more than 8% on Thursday. The COVID-19 social distancing is taking the retail and shopping malls by the storm. If you live in the U.S., you may have seen the company’s TV advertising every evening that attempts to woo customers with a new round of discount. The price decline was also fueled by Moody’s downgrade of the company’s debt to a lower grade which means even investors looking for a stable dividend may not trust Macy’s anymore. No amount of discount convinces customers and investors to rush to Macy’s anytime soon.
What’s Your Plan?
So what happened?
Yesterday, we predicted three possible outcomes for Thursday’s jobless claims report. The third prediction was a possible spike in the stock market due to lower than expected jump in the jobless claims. We, jokingly, added that third outcome to our prediction because we knew how irrational the stock market can be. Of course, the stock market did what it does best, magnifying the society’s mood. High on the trillion-dollar cheque the government is writing for the economy, the stock market indices finished Thursday approximately 6% higher than where they started the day. To put things into perspective, the one-year return of the Nasdaq index is now above 2%.
We have been telling you about the high likelihood of the stock market recovery not because we are fortune-tellers, but because we know the stock market is rational. Of course, the hindsight vision is 20-20. And, there is still a high likelihood that we go through another sharp decline in the days and weeks to come.
However, if you ended up selling your investments on the low during the last few weeks, ask yourself and document your answers as to what drove your decision to sell. Was it fear or logic? If it was logical, more power to you. If it was fear, what’s the plan to avoid that the next time we go through such market fluctuations, knowing that no one can predict the market. What’s the plan?
About the Author
The authors of this Scoop are the editorial team at Stock Card, led by Hoda Mehr. Hoda Mehr is CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 40,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism, and storytelling to all aspects of her work. Before starting Stock Card, Hoda worked as a strategy and insights lead at technology companies including Symantec, Aimia and Sony. Create a free account to do your stock market research easily and mistake-free: Stock Card Stock Card
