Exuberance
By Wed, Aug 19, 2020
Hey Scoopers,
The S&P 500 hit a new all-time high record only a few months after one of the largest global economic shutdowns due to the COVID-19 pandemic. — More on that in the “Overall Market” section.
Beyond the overall market, a value investors’ darling popped, while a company’s COVID-19 vaccine progress wasn’t too exciting to investors. — More on that in the “What’s Up?” and “What’s Down?” sections.
Oh, by the way, there is a risk that the market is reaching exuberance. — 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: Stock market indices wrapped the second day of the week in disagreement. Scroll down to the “Overall Market” section to read more.
- Cryptocurrency: Bitcoin’s price managed the stay above the $12,000 mark, but only barely.
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All-Time High Record
Tuesday’s stock market outcome wasn’t too different from Monday. The Nasdaq took the lead, the S&P 500 moved slightly, and the Dow ended the day in the red. It would be remiss not to mention that although the S&P 500 index only moved barely compared to Monday, the index reached a new all-time high record.
A Value Investors’ Darling
So, what happened?
Shares of Groupon (Ticker: GRPN) were up more than 20% on Tuesday. The company announced a partnership with Rezdy to add “experiences” to its platform. Despite its somewhat disappointing results in recent years, the latest quarterly earnings were better than expected. The stock’s solid balance sheet has made the stock a darling of value investors.
The Elephant in the (5G) Room
Now is a time when it pays to heed timeless financial wisdom.
John Templeton, one of the world’s greatest investors, once said, “To buy when others are despondently selling and to sell when others are avidly buying requires the greatest of fortitude and pays the greatest ultimate rewards.”
No Excitement Despite Progress
So, what happened?
Shares of Novavax (Ticker: NVAX) were down by more than 6% on Tuesday. On Monday, the company announced the start of its phase II random trial in South Africa. Analysts were excited about this trial phase because it can provide the company with the data about its vaccine’s efficiency. It’s noteworthy to mention that Bill and Melinda’s Foundation has awarded the company $15 million to conduct this trial. Still, investors are not as excited and decided to sell the stock after Monday’s quick rally.
When Market Exuberance Arrives…
So what happened?
They say it’s safe to invest in a market’s rally as long as investors remain cautious. The recent stock market rally was a good example of it up until now. Despite the rally, it wasn’t hard to hear about investors staying on the side and not pouring money into the market. However, recently, things are changing.
Take Bank of America’s recent client survey. In the week of August 13th, almost 50% of the respondents to the Bank of America’s survey characterized the market as a bull market, up from 40% in July. This is an interesting statistic to watch. Most investment gurus would tell you to not to be in the market when it hits exuberance. We are not saying the Bank of America’s survey says so, but it is worth watching the trend in the coming weeks.
Do you think we have reached market exuberance? Our email address is members@tradestocks.com. Let us know if you have any feedback, questions, or ideas to share.
Disclosure: Authors of this Scoop own shares of Apple (Ticker: AAPL).
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
