Stocks Spike While People Can’t Afford Food

The mantra on retail trading forums is ‘stocks always go up’. The new mantra must be ‘all stocks always go up’ based on the recent market action. As you can see from the chart below, 90.19% of Russell 3000 stocks are trading above their 200 day moving averages which is the most since 2009. 89% of Russell 2000 stocks are above their 200 day moving average which is the most since 2004. This was the fastest almost doubling the small cap index has ever had. It is heavily weighted towards the banks which have done well ever since the vaccine news came out in November. 

The NAAIM fund manager exposure index fell from 106.11 to 101.47, marking the 5th straight week it has been above 100. It pays to be leveraged long the market which is why so many are doing it. On financial Twitter, it’s common to see retail traders playing with leverage while owning speculative stocks. That’s a double mistake in risk management, but in 2020 risk is a foreign concept. When all stocks go up, you don’t worry about corrections. Retail favorites are up 81.2% year to date. Robinhood investors have $20 to $30 billion which is the equivalent to top 20 global hedge fund.

Stocks have been impenetrable to any bad news. Even reports that Pfizer has millions of vaccines that aren’t being given out because it has gotten no directive from the U.S. government didn’t cause a selloff on Thursday. The S&P 500’s multiple is approaching the peak in the late 1990s. This is like a combination of the 1990s and 2009’s spike because there is a lot of fear of missing out in the market and we are coming off a recession with suppressed earnings.

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