Signs of froth?

The Financial Times is calling it the FOMO rally; its persistency has our traders a little baffled but can it continue? Many analysts are suggesting there are ‘obvious signs of froth’.

A “fear of missing out” has gripped global markets, lifting everything from stocks to cryptocurrencies to record highs. US equities are at the epicentre of the worldwide rush into stocks that has almost doubled the MSCI All-World share index since the coronavirus crisis nadir in March 2020 — one of the most powerful runs for global equities in history.

Some analysts are beginning to feel nervous. Charlie McElligott, an equity derivatives strategist at Nomura, said that he was feeling a little “yikes” watching markets at the moment. “It seems that ‘peak Fomo’ is permeating speculative assets,” he wrote to clients this week.

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Highlighting how tough an environment this is for the dwindling band of bearish investors, Russell Clark of Russell Clark Investment Management finally threw in the towel this week, closing his eponymous London-based hedge fund after attempting to lean against the past decade’s market rally.

The frenzy is unsettling a lot of investors, who fret that what was a powerful but largely justified rebound from the shock of the coronavirus may now be verging into something more dangerous. “Everything seems crazy, there are bubbles here, bubbles there, everywhere,” said Erik Knutzen, chief investment officer at Neuberger Berman. “It’s become a cliché, but we really are in uncharted waters, very unusual territory”.

Many of the traders on the platform have taken short positions believing the market to just be ‘too high’. Whether it drops next week, or next month, many strongly believe it has to drop.

Having said that, without knowing when the market will rise or fall, it’s always worth having a tracker or two in your portfolio. It’s the only way of guaranteeing you get the overall moves up when they happen.

This week our FTSE tracker x3 made 1.3% which is great for all those who have it quietly working away in the background. It is due to this success that The Portfolio Consultancy will be creating new trackers for The Platform. Soon you will be able to add other cheap tracker strategies to your portfolio. TPC have agreed to build a Nasdaq x3 and a S&P x3, for only £50 per month giving all investors access to leveraged US equity exposure.

Please feel free to contact us if you have any questions. We are always happy to help.