Pinduoduo- E-commerce outperforms and boomsE-commerce will continue to have strong CAGR as the brick and mortal stores fold under the pressure and the whole world becomes even more digitalized in the future.
RSAFS
Wilshire 4500- You are not in the crystal ball businessWhat a crazy time we are in. 5 months ago, all was gloom and doom. Last month, almost every asset class was up except USD.
SP500 has been above 3200 for one month and Nasdaq has been hitting ATH for 3 straight months.
How do you explain this market irrationality?
One possible reason is that pension, endowment funds and investors are forced to invest in equity market in the ultra low-interest environment.
According to AAII (American association of individual investors) asset allocation's survey in July, 33.6% is invested in stock funds and 28.6% is invested
in stocks. Only 3.4% is invested in bonds.
According to Nomura, growth stocks have been outperforming value stocks for the last 15 years . Investor's penchant for fast growth and high valuation
stocks lead to more velocity and volatility.
According to Chris Irons of QTR research, holding period for stock has been steadily dropping over the past two decades. In the last two months, the
stock holding period has gone down from 8 and half months to 5 and half months. In the current environment, market is flooded with high momentum
stocks and the lure of chasing the rainbow is driving the increasingly common day trading mentality. Such volatile atmosphere typically leads to more
FOMO behaviors.
It makes even more sense if you factor in the wide availability of zero commission and fractional trading. Positive vaccine news may have also lifted the
investor sentiment and contributed to the irrational exuberance.
Has the market factored in all the bad news as it was mostly immune to the record-shattering bad GDP and resurgence of Covid-19 cases in July? Despite the poor GDP #, most other economic indicators actually improved including the ones I showed in the chart.
Stock market momentum may stall, or it may even crash in the near future. However, at this point, I believe it will take extraordinary events such as hyperinflation, weakening of dollar (lose of reserve status), sovereign debt crisis, massive eviction or consumer debt default to go back to March low. With programs like PPE and massive QE to infinity in place, FED will ensure that interest rate remains low and continue to bail out zombie company in order to keep unemployment lvl artificially low.
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