Widespread overconfidence is putting investors in a dangerous situation these days. According to Invesco’s Kristina Hooper, she is worried about the overzealous investors getting swept up in market momentum. Whether its optimism or pessimism, she warns that they are becoming dangerously overconfident about where the market is heading to next. The firm’s Chief Global Market Strategist told that people have become very set in their opinions. Most of the investors believe that there’s no end in sight to the stock market rally and others believe that because they continue to hit new highs, things are getting quite frothy.
According to the financial analysts, they observe that lots of investors, mostly on the retail side, are making risky one-sided bets off their polarized market views. They believe that a major trap is there that will result in huge losses. By adding with this, there is some speculative fervor in markets, and it is similar to what is seen with bitcoin. It also shows some characteristics to the excitement surrounding the late 1990s tech bubble.
They have been the ones, who oversee $1.1 trillion in assets, with a view of the rising popularity of no-fee online trading platforms such as Robinhood, as this creates big access to the markets and contributing to enthusiasm among retail investors. Practically, it’s always for good more investors to come into the market. This can remind them of important long-term investing tenets like diversification.
The last couple of months have been a truly difficult time for investors. From completely ignoring the pandemic the fact is that the market was at an all-time high of 42,273 as recently as January 20, 2020, the market went into a panic mode and lost 40 per cent in just two months.
Using a barbell approach to investing and a 12 to 18 month time horizon is advised by experts to all the clients, also recommending, growth stock on one end and value on the other. This is due to the lack of visibility because of the upcoming presidential election and definitely the unpredictable COVID’19. Last Monday, the S&P 500 hit another all-time high and closed above 3,400 for the first time ever. The Nasdaq also has a strong performance. The tech-heavy index recorded its 37th record close so far this fiscal year.
