Markets

I don’t want to burst anyone’s bubble, especially not the everything rally’s party, but the benchmark 10-year Treasury rate is starting to look like the head of a pin.

Bubbling stocks and other inflated asset classes are in danger of popping if rates keep rising, and they sure look like they’re going to keep climbing. But even if the bubble pops, we can still turn a profit, and I’m going to tell you how.

Let’s dive in…

I’m not the kind of guy to say “I told you so,” but if I was, I’d sure be saying it now.

Retail traders have become the tail wagging the dog, with the dog being Wall Street pros.

GameStop Corp. (NYSE:GME) is exhibit 1.

What happened, and what’s going to happen with GameStop (and more than a few other companies’ stocks) is the story of how retail traders are ganging up on multi-billion-dollar hedge funds…

Here’s how they’re making a killing doing it.

In hindsight, the market’s extraordinary rally on the heels of Donald Trump’s election was mostly unexpected, until investors realized they had to get on board or miss the bus. And they did – get on board, that is. And they kept coming and markets kept rising.

This time around, investors are expecting markets to climb on the heels of a Democrat-led Congress and Executive Branch. And markets are already rising.

The question a lot of analysts and investors are asking themselves is, will a Democrat-led economy crush the push markets got under a Republican presidency?

My bet is they will.

Here’s what that means for you and your money…

What a week it was – and I mean for markets.

The Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite notched new record highs on Friday, and the Russell 2000 made its mark the day before.

Last week’s message wasn’t so much “so what,” as it was “spend, spend, spend” because that’s what markets were focused on.

The Democrat-controlled Senate, House, and Executive branch are expected to unleash a tsunami of spending that investors expect will include helicopter money dropped into Americans’ bank accounts, a lot of which will end up being moved into their brokerage accounts, spending on infrastructure, the environment, the economy… You name it, and there will be money thrown at it.

That’s what drove markets higher last week. And there’s no reason they can’t keep on rising.

Here’s what I mean…

The political beat isn’t my thing, but democracy and making money are right up my alley.

That said, I’d be remiss if I didn’t address what happened at and in the U.S. Capitol on Wednesday.

I’m sticking to the middle of the road here and focusing more on what will happen now that the Senate is in the hands of the Democrats, the Presidential inauguration is right around the corner, and we’re on the brink of what we hope to be a prosperous new year.

Here are my thoughts…

Your Capital Wave Forecast for this week is “bullish.” For this month, for the first quarter of 2021, and for the year, it’s bullish.

That doesn’t mean we’re not on “bubble watch,” because we are.

The forecast is bullish because equity markets can continue to rise as bubbles self-deflate, get pierced, or burst spectacularly.

That’s where we’re at. That’s how strong momentum is coming out of 2020 and going into 2021. The same momentum-drivers will likely persist throughout the first quarter and probably the first half of the year.

Here’s what’s on my radar for the first week of 2021…

Just when everything was looking like so many presents around the Menorah and under so many Christmas trees, the Grinch appears.

Has he stolen investor optimism, or is this just a smirky reminder that not everything’s right with the world?

Here’s what’s going on…

If you want to know why I’m so bullish, all you have to do is look at the Russell 2000: It’s on fire.

The “rotation” trade has done A LOT for the Russell 2000 a lot for equities across the board.

And I’ve got the perfect trade to go along with this trend…

“As long as the music is playing, you’ve got to get up and dance.”

That’s your Capital Wave Forecast. It’s short and sweet and reminiscent of another time when markets were rocking, and investors were raking in the dough.

You might even say, “It’s like déjà vu all over again,” as famously said by Yogi Berra.

Here’s what I mean, and what to listen closely for as we close in on the end of the year…

I’ve been having lots of conversations lately with lots of investors (on the phone, by the way). And there’s something creeping into their optimism: doubt.

It’s understandable. Amidst the rampant bullishness that seems to be pervasive across all demographics of investors, from retirees and Baby Boomers, to Millennials, Gen Xers, even Gen Z, there are signs of that smack of bullishness reminiscent of 2007 or 1999, two years that preceded spectacular crashes.

Last week, a shortened trading week, saw more of the same – more record highs for benchmark indices, that is:

• The Dow rose 647 points on the week, closing Friday 2.2% higher on the week, after notching a new all-time high of 30,116.51 earlier in the week.
• The S&P 500 notched a new high too, and closed the week up 2.2%.
• The Nasdaq Composite, which had been lagging, made a new high too, ending the week 2.95% higher.
• And the Russell 2000, measuring stick of the “value” and “rotation” trades, also hit a record, ending the week up a stellar 3.9%.

Irrational exuberance? Yes, I’d say so.

Are things that good everywhere, in all sectors, in all industries, by all measures? No, I’d say not.