Stocks: Bull Or Bubble?

This week, Tracey is joined by Kevin Cook, Zacks Senior Equity Strategist, for a look at the hot stock market in 2020.

Stocks picked up where they left off in 2019, with new highs. The growth stocks continued to be on fire and large-cap growth names were hitting new highs nearly every day of 2020.

Many have taken to asking whether or not this is just a bull market or if it’s turning into something more ominous, like a bubble.

Defining a Bubble

Want to know what the definition of a bubble is and what characteristics to look for?

Tracey got out her Fourth Edition copy of Charles Kindleberger’s great book “Manias, Panics, and Crashes” where he discusses the history of financial crises ranging from the South Sea bubble to tulips to Japan’s bubble in both real estate and stocks in the 1980s.

Several characteristics leap out including:

1.  Investors like to join the bandwagon.

2.  Central banks and governments flood the market with easy money.

3.  Where there’s one bubble, sometimes there are others at the same time.

Is this stock market a bubble? Kevin and Tracey discuss it.

Should You Be Buying the Hot Stocks Here?

1.    Sony (SNE - Free Reportjust hit a new 5-year high. PlayStation 5 is rolling out this year which should be a huge earnings driver for the company. It’s only trading at 17x. That’s positively cheap for tech and entertainment company.

2.    Square (SQ - Free Reporthas lagged the red-hot stock market over the last year as shares are up just 6.4% while the S&P 500 has jumped 27%. Is this a buying opportunity in one of the well-known growth names?

3.    NVIDIA (NVDA - Free Reportis back. After hitting new highs in late 2018, and then plunging on an earnings warning, the shares have rebounded, gaining 67% over the last year. They’re still expensive, at 42x, but earnings and sales are expected to rebound next fiscal year.

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Disclosure: Tracey owns shares of LULU in her personal portfolio.

Disclaimer: Tracey Ryniec is the Value Stock Strategist for She is also the Editor of the  more

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Gary Anderson 8 months ago Contributor's comment

Old folks will get greedy and stay in stocks if they know it is a bubble? Hope not. But good trade war and PE insights by Kevin and Tracey.