The Dow Jones Industrial Average (DJIA) headlined another booming day on the stock market - but has the index rallied too far?
It’s been an impressive run for U.S. stocks. The Dow Jones Industrial Average (DJIA) looks set for its 8th consecutive green day after the index exploded more than 300 points higher this morning.
As always, after every winning streak, the bears come out of the woodwork. Today is no different. This morning, Paul Gambles at MBMG Group warned that a major correction is coming across all assets.
Having seen an ‘everything rally’, the corollary to that could be an everything crash, and that’s what really worries us.
Video: an ‘everything crash’ is coming, says analyst
He said advisors should move to cash and wait on the sidelines for a better opportunity.
Wall Street is firmly in risk-on mode this morning. As of 9:42 am ET, the Dow was up 348.72 points (1.25%) at 28,140.16, while gold and the dollar both slumped.
The S&P 500 rallied 0.47% to 3,376.38, but the Nasdaq struggled – again. At last check, the tech-heavy index had fallen 0.47% to 10,916.81.
Since the March selloff, we’ve seen an epic recovery in a wide range of assets. Stocks, gold, silver, even bitcoin has rallied in recent months. Gambles said this “everything bubble” makes it impossible to find good value.
The problem is we’ve now had a really crazy ‘everything rally’ and there isn’t anywhere to go any more that looks like decent value. You can’t find anything.
At all-time highs, he thinks gold is vulnerable to any hint of good news. And if the Federal Reserve starts tightening monetary policy again, both gold and stocks will unwind, he said. If rates tick higher:
That punctures the gold bubble. That also punctures the equity bubble.
While Gambles is bearish on stocks, one analyst sees a “once-in-a-decade opportunity.” Jun Bei Liu, portfolio manager at Tribeca Investment Partners told Bloomberg there is “so many things to be positive on equities about.”
Equity has never looked cheaper compared to the fixed income and the like. If you want any income or even any growth, you have to go to equities.
Video: Once in a decade opportunities in stocks
Although tech stocks have led the run-up, she sees plenty of opportunity in virus-hit sectors. These stocks are trading at “some of the cheapest valuations,” she said. It’s a once-in-a-decade opportunity to load up on strong companies for the future.
The Dow is also enjoying a boost after President Trump said he’s considering a capital gains tax cut.
All eyes are on Congress today. Investors hope to see Republicans and Democrats come back to the negotiating table to hammer out a second relief package. Both sides criticised Donald Trump’s executive orders and seemed willing to resume talks.
Elsewhere, tensions with China remain high. Steven Mnuchin said on Monday that some Chinese companies could be delisted from U.S. exchanges if they don’t stick to U.S. accounting rules. China doubled down on its support for domestic semiconductor production.
Last modified: March 4, 2021 2:45 PM