Finding Stable Investments In An Unstable Market

I find it a bit strange to say this, considering everything that happened last year, but we are in a period of unprecedented uncertainty as far as investing goes.

I regularly read and hear commentary covering both sides of where the stock market will go for the rest of 2021. As I went through my morning news feeds, I noted some interesting commentary that points toward potential (or even ongoing) stock market disruption. Here are some thoughts and quotes.

So far, 2021 has been what I call the “year of the low-information trader.” Individuals who have never invested are now trading on Robinhood-type apps, following stock ideas they get from social media. I think this quote from Jim Cramer is a backdoor comment about these new traders: “If you don’t know if the company makes money, you shouldn’t be owning the stock.”

I don’t pay much attention to the hot tech stocks, especially the high flyers that promise to be profitable eventually, just not someday soon. So I was a bit surprised that according to CNBC, Tech stocks are down 25% to 50%.

Wow! That’s bear market territory. I have watched with fascination as Kathy Wood’s ARK Innovation ETF (ARKK) gained 150% when the fund had very little in the way of assets… and then after it was discovered and investors piled in, the fund’s share price took a tumble. As I write this, ARKK is off 38% from the fund’s February 2021 peak.

Cryptocurrencies are another hot topic for traders. The theory is that cryptos can, to a certain extent, replace good old U.S. dollars. However, the crypto values remain highly volatile. I took the following quote from a Bloomberg email update following the news that Tesla has suspended its policy of letting customers pay for a new car with Bitcoin, as announced by Elon Musk.

Musk’s online persona seems to have an influence over the value of Bitcoin, and, as Paul Donovan of UBS wrote in a recent client letter, “if one person can dramatically alter spending power, the ‘stable store of value’ criteria of a currency is not met.”

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