CNN Business/Paul R. La Monica
The stock market is at peak dumb: Etsy soars because Elon Musk tweets about it
Tesla CEO Elon Musk is the richest person on the planet, but he’s apparently still happy to shop on handmade craft site Etsy. And in a sign of just how much influence Musk has on social media, shares of Etsy (ETSY) soared nearly 10% in premarket trading Tuesday just because he said he’s a fan.
“I kinda love Etsy,” Musk tweeted, adding in a follow up tweet that he bought a wool Marvin the Martian helmet (the alien from the Bugs Bunny cartoons) for his dog — fitting as Musk, of course, wants to one day go to Mars with his other company, SpaceX.
The stock pulled back later in the day though. It opened 8% higher but was down 2% by afternoon.
Still, given there was no other company news from Etsy Tuesday morning, it seems safe to say that Musk’s tweet was the primary catalyst for the stock’s premarket surge.
That, of course, is ridiculous. It’s also yet another example of the increasingly short-term nature of the stock market, one where algorithms can drive prices and individual investors using services like Robinhood are eager to make a quick buck.
Recently, shares of companies that many professional investors are shorting — because they expect the stocks to go down since the companies are struggling or overvalued — are instead surging thanks to support from traders on a popular Reddit board. GameStop (GME), BlackBerry (BB), Bed Bath & Beyond (BBBY), Macy’s (M) and AMC (AMC) are just a few examples.
Fox Business/Megan Henney
Coronavirus relief spending fueling a stock market bubble, BofA warns
The stock market is in a bubble that’s being fueled by U.S. policy on coronavirus stimulus, Bank of America economists warned in a note to clients.
“D.C.’s policy bubble is fueling Wall St’s asset price bubble,” the strategists, led by Michael Hartnett, wrote in a Friday note. “When those who want to stay rich start acting like those who want to get rich, it suggests a late-stage speculative blow-off.”
The analysts are referring to the Federal Reserve’s monetary policies and massive spending policies from Congress.
The Fed responded to the crisis by pumping nearly $2.9 trillion into the economy, and its balance sheet has expanded to more than $7.4 trillion, a record. Central bank policymakers also slashed the interest rate to near zero during an emergency meeting in March and launched crisis-era lending facilities to ensure that credit flows to households and businesses.
At the same time, Congress has approved nearly $4 trillion in spending intended to blunt the economic pain of the coronavirus pandemic, including sending two cash payments to most Americans, boosting unemployment benefits and establishing the Paycheck Protection Program, a grant program for small businesses.
As a result, BofA said it expects the Fed balance sheet to surge to 42% of US GDP this year, while it expects the budget deficit to hit 33% of GDP, BofA said.
Gold to push above $2,000 as Saxo Bank sees 2021 as the start of broad commodity bull market
The precious metals market has seen a volatile start to 2021 as gold is down about 5% from its highs at the start of the month.
The yellow metal has struggled to find consistent bullish momentum as it tests resistance around its 200-day moving average. April gold futures last traded at $1,855.60 an ounce, down 0.18% on the day.
However, one bank is looking past the current consolidation, and it expects gold and silver prices will continue to move higher in what they see as the start of the seventh commodity bull market in 225 years.
“A commodity bull market is part and parcel of a new secular inflationary regime, a development few investors alive recall during their professional careers, as the last one ended about forty years ago,” said Steen Jakobsen, chief investment officer at Saxo Bank, in the bank ’s first-quarter outlook report.
“We think this theme will rapidly come to dominate investors ’ attention in 2021, and could last for a decade or more. The key driver is the enduring response to the pandemic, which only accelerated trends in inequality that had been building since the 1980s and the following three decades of globalisation. From here on out, we will see a real macro paradigm shift as the policy focus drifts away from the traditional focus on ensuring financial stability to one that demands social stability above all else,” he added.
Looking specifically at the precious metals market, Ole Hansen, head of commodity strategy at Saxo Bank, said in the first-quarter report that he expects gold prices will continue to be well supported by rising inflation pressures, coupled with a weaker U.S. dollar.
Currently, the bank is looking for gold prices to push to $2,200 an ounce this year, with silver prices rising to $35 an ounce.
Despite gold ’s lackluster performance in the last two weeks, Hansen said, “we maintain a constructive view on the sector with rising yields being primarily the result of a gold-supportive rise in inflation expectations; this will leave real yields, a key driver for gold, well into negative territory. Together with accommodative central bank policies and renewed dollar weakness, the path of least resistance remains to the upside.”
Markets will seesaw for months, Invesco top strategist warns
Invesco chief global market strategist Kristina Hooper sees a volatile dynamic between optimism and pessimism playing out on Wall Street.
According to Hooper, it will contribute to seesaw market behavior for months.
“We are going to see some pretty significant economic headwinds in the near term driven by Covid-19,” Hooper told CNBC’s “Trading Nation” on Monday. “There will be bad days when stocks are weighted down by negative news flow around infection rates as well as difficulties with vaccine distribution.”
Her base case: The U.S. won’t see a strong economic rebound until later in the year.
“There are likely to be some down days, especially in the first quarter, just given what we’re up against, and just the reality that we’re unlikely to see broad distribution of vaccines in the U.S. until midyear,” said Hooper, who oversees $1.2 trillion in assets.
Until then, she predicts, investors will be going back and forth between economically tied market groups and defensive or growth stocks, including technology — particularly since interest rates remain so low.