Risks Out There 06 (May 20 - Dec 24)

[behappyalways]

Wall Street Week Ahead: Stock investors cast wary eye on yield rally
https://www.reuters.com/article/idUSKBN ... 1600603479

[winston]

Risk Exceeds Reward - Why We Took Profits

by Lance Roberts

Summary

Just because the market is overbought, extended, and deviated from long-term averages, does not necessarily mean an immediate correction. Such requires a catalyst. The overbought conditions provide the fuel for the correction.

We continue to suggest some caution through active portfolio risk management until some of the excesses get reversed.

Jeff concludes with two questions.
1. Is the current relative performance pattern sustainable?
2. Should we now expect more fat-tail events?

His answers were simplistic:
1. Maybe not; and,
2. Definitely.

"When people take 'a little risk' and get rewarded for it, they are then encouraged to take 'a little more risk.'

As my colleague Victor Adair notes, 'People in the 'crowd' don't appreciate the risks they are taking because they're surrounded by people who believe the market will keep going up.'"

Source: Seeking Alpha

https://seekingalpha.com/article/439086 ... ent=link-3

[winston]

This Crazy Stock Market: A Story Told With Pictures

Summary

Greed is driving the US stock market to new highs.

Fear will eventually replace greed. We provide 10 reasons to be fearful.

If something cannot go on forever, it will end. The questions are not if but when, and how bad.

1. The Stock Market is in a Bubble
2. COVID-19 is getting worse, not better
3. The World Debt Crisis
4. Zero Interest Rate Policy (ZIRP)
5. The Economy is in A Shambles
6. A Great Wealth Divide is Causing Social Unrest
7. Nuclear Threats
8. Social Security and Medicare Will be Bankrupt Soon
9. Serious Inflation Has Occurred and More is on the Way
10. Target Date Funds do not Protect Those Near Retirement

Source: Seeking Alpha

https://seekingalpha.com/article/439217 ... nt=link-10

[behappyalways]

One risk I think is when the vaccination starts, there might be a lot of complaints and maybe legal issues from the effects. Then the market will start to doubt the effectiveness of the vaccine and turn bearish. The public can sue the drug companies if they want for the directors of those companies have already sold out their shares.

94% effective rate within a year of research seems to be too good to be true.

[investar]

if the communication is: 94% effective, then aren't the drug companies "off the hook" legally (if there are less than 5% of complaints)?

Anyway, another way to look at taking on market risk at today's level:

There is a short term risk for owning stocks. But there is a long term risk for not owning stocks.

[winston]

The stock market is ‘very, very vulnerable’ at these euphoric levels and a ‘timeout’ is in order, investor warns

By Shawn Langlois

Peter Boockvar, chief investment officer at Bleakley Advisory Group, warned that stocks are teetering at dangerous levels amid the kind of euphoria last seen during the bubble days of the dot-com boom.

He pointed to the Citi Panic/Euphoria Model, a contrarian indicator to bolster his bearish case.

“If you get a confirmed move above 1% in the 10-year, that would be the perfect catalyst to get a pullback in equity markets that would take out some of this froth and complacency.”

Source: Market Watch

https://www.marketwatch.com/story/the-s ... eid=yhoof2

[winston]

What could rattle markets in 2021, even as vaccines are rolling out

By Joy Wiltermuth

Risks include vaccine rollout issues, new strains of COVID-19, presidential transition, cyberattacks and more

Source: Market Watch

https://www.marketwatch.com/story/what- ... eid=yhoof2

[winston]

As stock markets ring out 2020, here’s the most underappreciated risk to their stability in 2021

If investors’ confidence in central banks is shaken before mass vaccination programmes are in full swing and the recovery gains momentum, sentiment could deteriorate quite sharply

by Nicholas Spiro

A key gauge of inflation expectations in the US over the next five years has come within a whisker of 2 per cent, up from 0.16 per cent in mid-March and the highest level since October 2018.

If current forecasts for growth and corporate earnings prove prescient, major central banks, in particular the Federal Reserve, may find it difficult to control longer-term yields.

An off-the-cuff remark from a policymaker could prove more destabilising for bond markets than an uptick in inflation.

Source: SCMP

https://www.scmp.com/comment/opinion/ar ... risk-their

[winston]

These 3 risks mean 2021 is ‘not a time for excessive optimism’ for markets, says Pimco

By Sunny Oh

1. Deleveraging in China
2. Fiscal fatigue and
3. Economic scarring from the pandemic-driven downturn.

Source: Market Watch

https://www.marketwatch.com/story/these ... eid=yhoof2

[behappyalways]

Bitcoin and U.S. tech stocks are the biggest market bubbles right now, investors say
https://www.cnbc.com/2021/01/19/bitcoin ... -says.html