Buying frenzy on the stock markets - February 19, 2020

Buying frenzy on the stock markets

American stock markets are going higher by the day. It seems that no one wants to miss out the momentum we see on the market. S&P 500 made 117 days without a -5% pullback. Such a bullish market may see small fluctuations but historically goes higher on the longer term. Many other circumstances support this.

Nobody wants to miss the momentum

What we see on the market now is that nobody wants to miss the upward trend. After a weaker 2018, markets skyrocketed last year. We – and other analysts – expect stocks to go even further. This sentiment overtook the investors and now everyone is buying shares like there’s no tomorrow.

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What’s behind it?

This growth is fueled by the diminishing fear of the Chinese-US trade war, and so far Brexit hasn’t turned the world inside out. US President Donald Trump and the rather easy financial policies of the American and European central banks also benefit the markets. What’s more, FED may further ease the markets with QE programs or rate cuts if this momentum slows down.

The Bezos-effect

Last week, the case of Amazon founder Jeff Bezos proved how bullish stock markets are. He sold $4.1 billion worth of Amazon share in 11 days. Usually when such a huge selloff happens, stock prices dip at least a little bit. Not this time. Investors immediately bought this huge amount of stocks virtually and Amazon prices just went further up.

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The IT-craze

But it’s not just Amazon that performs magnificently in the last months. Alphabet (Google), Apple and Microsoft also worth more than $1 trillion. Just 1-1.5 year ago only Apple had such a high valuation and that was all over the news. Now other companies are blooming like that too. These firms are also helping the S&P 500 to reach new records by the day, while the top 5 companies in this mix have 20% of value.

What to expect?

Just to see how strong this momentum is, the S&P index has gone 117 days without a -5% pullback. What does such a strong drive mean? Well, based on historical data, the index may face short term weakness, but whenever this happened, it always went up median +18% next year.

Although these figures are extraordinary, careful and well-diversified investments, such as the pick of professionally crafted portfolios are advised.

Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.