Stock Market Forecast For The Week Ahead: Will The Mania Continue?

STOCK MARKET FORECAST: BEARISH

  • An action-packed week saw retail traders command the market’s focus, will the peculiarity persist?
  • The week ahead will see the release of big ticket data like US non-farm payrolls and Euro Area GDP

STOCK MARKET FORECAST FOR THE WEEK AHEAD: WILL THE MANIA CONTINUE?

The investing world was thrown into disarray last week when a band of Reddit-based retail traders ignited an apparent short squeeze in GameStop’s stock. Filled with FOMO and eager to join in on the effort, more retail traders then began piling into other stocks with high short interest – hoping to spark a similar squeeze. The surge in a few select names dominated financial news media and is prevalent in discourse outside traditional market-related mediums.

Video Explainer – GameStop Short Squeeze and Other Reddit Favorites

Public outrage ensued when brokerages began limiting access to the shares in question which expanded the phenomenon, drawing the attention of regulators and public officials across the country. The short squeeze has since ballooned into a remarkable moment in popular culture. These individual investors have created an incredibly complex situation, however, and the idea that “stocks only go up” - a rallying cry of some newly minted GameStop shareholders - is a dangerous falsehood.

It is under these circumstances that market participants should look to past bubbles, manias and financial crises for insight as many have ended in disaster. Further still, it is important to understand one’s exposure when investing and to practice proper risk management. There is no telling how long the event will last and losses can mount when normal market conditions prevail and it is time to exit the trade.

DOW JONES, NASDAQ 100, S&P 500 FORECASTS

OUTLOOK: BEARISH

The ongoing phenomenon has undoubtedly disrupted the regularly-scheduled programming of the market, as earnings from Facebook, Apple and Tesla – in addition to a FOMC rate decision - went relatively unnoticed last week. Quarterly reports are set to continue in the week ahead with big names like Alphabet, Amazon, Alibaba and Exxon.

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