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From Stocks to Bitcoin, Investors Bet the ‘Everything Rally’ Will Continue

All eyes are on whether Wall Street’s momentum can continue into 2021.
(AshDEsign)
(AshDEsign)
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“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:

  1. Analysts see potential obstacles, such as rising Covid-19 cases and the fallout from the Georgia Senate runoff election.
  2. 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.”
  3. “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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