Do you believe this? DJIA went down by 5%. The S&P 500 went down by 148.48 points and 4.15%. Do you think that is bad? Wait till you hear the worst of the bunch, and that is the NASDAQ, which went down by 675.90 points and 5.61 % last week.
These figures we are getting are unbelievable, and it is starting to say something about the stock market.
Good day viewers and welcome to yet another intriguing blog post about the ongoings in the stock market. In this blog, we will be discussing what may be affecting the stock market negatively and its possible solutions.
However, there are some big winners in the stock market like VIX, which has gone up by 8.96 points and a percentage average of 33.72. Generally, when we see the VIX numbers go sky high in the stock market, it represents a bad day for the market.
We have got many market strategists saying negative things like “The market is facing a Minsky moment collapse” or “There are negative signs in the stock market.”
I think it is safe to say that most of the hot stocks in the stock market with these ticker symbols ZM, TSLA, WORK, AAPL, FB, MSFT, AMZN, GOOG, and SHOP have suffered losses for some days in a row.
As if that was not enough, we have companies with ticker symbols RCL, NCLH, and CCL go up a notch. It is just like having the weakest child win a wrestling contest.
There are a lot of questions on the minds of investors. Questions like:
- What is going on?
- What are people saying?
- Will this continue?
- Do I like this?
Listen to this carefully. Asset prices could be on the cusp of a collapse, which people call the “Minsky Moment” and may reach new lows that were last seen in March. This was said by Ron William, Founder and market strategist of RW Advisory.
Markets today may have experienced a bullish period in recent times as investors are opting to put their money on stimulus from the central banks and governments. So, what exactly is a Minsky moment? According to Hyman Minsky, the man that this term was named after, Minsky moment is a sudden collapse in the market after a bull run that could not be sustained but was fueled by what we call the “easy credit” environment which was a result of monetary stimulus and unprecedented fiscal measures. Someone even pointed out several factors that may have potentially driven the crash.
One of these factors was the nature of recent gains in the market, which were termed as narrow. Much of these positive actions in prices were driven by tech giants in the U.S. This is the recent happening in Wall Street, Main Street, and Tech Street. William also pointed out that when you look at the equal-weighted index of the S&P 500, it has barely moved above the June peak and has been going flat line since then, so we will see the obvious divergence.
What about ETF?
Exchange-traded funds (ETF) flows on the S&P are at a record low, and taking a look at the real-time index of market volatility expectations (VIX), we will notice an interesting spike as the markets went up, which boldly suggests potential hedging for risk associated with the downside. William cited that the Minsky moment could see the fall of assets by 20 % to 30 % or more, which may cause the current recovery, which is V-shaped, to lead to a retest of the low values of the March market crash. The S&P fell to very low numbers in March.
Most of the companies in the world today cannot justify the high levels of evaluations that are attributed to them, and they may take years to actualize those evaluations.
Some of these stocks that are on a low right now would not be that way forever, you know. Think of the stock prices as a living entity, and it has been active and awake for such a long time now. Don’t you think it needs some rest?
For example, NASDAQ has been on the rise and very active for the last five months, giving all the investors some positive values and making sure everyone investing in them does so with huge expectations and smiles on their faces. Isn’t it fair to let it rest for a while?
Guess another stock that needs some rest from massive investors? You guessed, right. It is TSLA. The values of these stocks cannot be sustained at that high value for so long. I am telling you now that it needs some sleep and some time to re-energize.
What is the worst-case scenario?
Here is something we would not like to see, the stock prices skyrocketing. It would be preferable to see steady progress because skyrocketing would create a bubble-like what we have previously seen in the former years. Nobody wants a stock market that is not active for a long while, and that is why we need these stocks to rest and recharge.
There have been nearly five trillion dollars parked in money markets as investors are scared of stocks. It is not good, and I can discuss why. They feel at any dip, and there will always be a buyer. They want to buy as long as there is any dip, and that scares me because, with that, the evaluations in the stock market hit sky-high levels.
We also need to make decent purchases in growth stocks and large-cap/big tech caps. I think it is time to let some of these stocks rest because if we do not do so, we will regret it in the long run. I strongly believe this is one of the problems of the stock market, and if you are to follow my idea and let these hot stocks, especially NASDAQ rest a while, they will come popping out.
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Recommended books for further reading:
- Investing QuickStart Guide
- Investing Demystified
- The Five Rules Successful Stock Investing
- The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits
- Rule #1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week
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