Fourth Quarter Review, Preview

Of course, there are stocks and there are stocks. I like what I like, own and recommend, and I frequently make my case for them.  But I watch a lot more for signs of excess in the stock and credit markets.  We are seeing a growing fascination with the riskiest stocks including new issues and special purpose acquisition companies (SPACs) that have yet to decide what business they'd like to be in. People are buying them anyway and IPOs of all kinds. That is not a good sign. We saw such buying leading up to the market peak in 2000 and at times in the 1960s and '70s.  In 1999 it was the dot-com mania. In the 1980s it was energy.  Now it's technology and electric vehicle plays.  Many will not survive. Reason for concern, if nothing else.

Whenever the market is trading at or near all-time highs, it's important to assess the risks. We are optimistic about getting to the other side of the Covid-19 chasm, but there are likely to remain some broken planks on the bridge to get there.  Few expect interest rates to increase much, which is why an unexpected rise might be the market’s greatest risk.  We’ll keep close watch.

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Disclaimer: David Vomund is an independent investment advisor. Information is found at vomundinvestments.com or by calling 775-832-8555. Clients hold ...

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Jaime Bond 1 month ago Member's comment

David, what are your views on the looming international debt situation as many nation states run dangerously close to default? While the US has the ability to weather the COVID storm, other countries will not have as much runway to economically meet their debt obligations. Since we still operate in a global economy, do you expect potential defaults to result in a different market forecast? What does history tell us?