The current volatility is attributed to various industry rotations in portfolios (especially in retirement accounts, which get rebalanced near the end of every quarter) and heavy-growth sectors. While a lot of people like to avert attention to a (obviously inevitable, but untimely) bubble, the largest group, FAANG, has not seen a move for the past 1/2 year despite QE and expected economic production. There are definitely companies highly over-valued like EV or renewables (especially solar power) - their stock performance fits the profile of a bubble.
You'll notice more funds rotating into cyclical industries as the economy drastically recovers, as people are itching to regain some semblance of normal life. The shift to airlines, hotels, tech, and retail leans on the back of vaccine progression.
Powell's biggest takeaway from his testimony last week was to ensure everyone was vaccinated. Fiscal (Treasury stimulus) and monetary (Fed) support will continue to remain in place, which may - as he noted - temporarily increase inflation, but within a tolerable band for the Fed. Emerging markets equities could be interesting now as the USD continues to weaken. My personal favorites are Taiwan + Latin / South America.
The biggest fear macro-economically (probably more than a year from now) seems to be the lack of investing in energy infrastructure. Energy needs could lead to supply issues, but this seems to be an afterthought for a lot of infrastructure budgets. Thinking on the larger scale, underinvestment in this segment can materialize into an energy crisis, ergo market meltdown (pun intended).
Submitted March 03, 2021 at 08:18PM by xRegretNothing https://ift.tt/2NR0R9p
