One More Crash Sign
By Tue, Feb 16, 2021
Hey Scoopers,
In less than two months in 2021, the Nasdaq index has already gained more than what it had achieved in eighteen years of the last three decades. — More on that in the “Overall Market” section.
Beyond the overall market, one air taxi stock is one of the biggest winners of 2021, while a biotech stock has lost half of its value over a setback in one of its many drug development programs. — More on that in the “What’s Up?” and “What’s Down?” sections.
Oh, by the way, it seems Buffett’s favorite indicator is pointing to an overvalued stock market. — 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 the week in the green. Scroll down to the “Overall Market” section to read more.
- Cryptocurrency: Bitcoin’s price is getting closer to $50,000 per coin every day now.
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Extraordinary YTD Return
The stock exchanges were closed for President Day, and the trading-free day gave us some free time to have a look at the market’s year-to-date return.
All three indices have had an excellent year-to-date return, with the Nasdaq index leading the pack, up by more than 9%. That means in less than two months, the Nasdaq’s return is already higher than its annual return in almost half of the years in the last three decades.
Air Taxi
So, what happened?
From the list of the best-performing stocks, shares of Ehang (Ticker: EH) are up more than 487% since the start of the year. It’s a company that develops air taxis.
An air taxi seems to be a scene from a futuristic fiction movie. However, the market for air taxi is on the rise. While EHang isn’t profitable or doesn’t generate free cash flow, it’s an early-stage technology stock worth paying attention to.
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One of Many Drugs In Trial
So what happened?
From the list of the worst-performing stocks since the start of 2021, shares of Sarepta Therapeutics (Ticker: SRPT) are down more than 46% since the beginning of the year. It focuses on a special type of gene-editing technology, known and RNA-targeting, to treat infectious diseases. The price crash seems to be an exaggerated reaction to the news that one of the pipeline drugs didn’t see the expected results it was hoping to see at its current trial stage. However, the company has several other pipeline programs that make it still an excellent candidate for a risky investment in the gene-editing space.
Another Crash Sign
So what happened?
Every day, the media discusses a new sign of a stock market crash. The one that grabbed our attention this week happens to be Warren Buffett’s favorite indicator. The ratio of the total stock market capitalization to GDP in the U.S. is peaking above 220%. According to Bloomberg, this is an indicator that Warren Buffett typically references as the sign of the market’s overvaluation.
All signs are signaling that the stock market is hovering above its historical measures. It doesn’t mean the market is going to stop going up from here. However, while everyone may be YOLO-trading with excitement, the Buffett indicator is one more data point that tells us to be cautious when investing in the stock market.
If you have any questions, or suggestions let us know by emailing us at members@tradestocks.com. We look forward to hearing from you.
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
