New Jersey, United States, January 19, 2021,  ZEXPRWIRE

Economic Outlook

2020 ended with a bang. The stock market soared, nearing or at all time highs all the while the American economy was left struggling. We all know that the ongoing Covid-19 pandemic has had rippling effects on the United States economy. Last week, unemployment claims jumped to 965,000 and estimated for fourth-quarter GDP growth has fallen to 7.4%, down from a previously estimated 8.7%.

Despite poor economic data and political turmoil, financial markets have been continuously hitting new all-time highs, as it would appear that valuations simply do not matter. You might think that it would be difficult to buy a stock that is up 300% over the past year and expect the stock to go up another 100% but in fact that has commonly been the case. According to the market cap to GDP ratio, used in determining if stocks are under or overvalued, the entirety of the U.S. stock market is roughly 77% overvalued. This has left analysts struggling to come to terms with valuations as well as questioning what is fueling this rally as younger, investors are seemingly outperforming accomplished and veteran traders. Jacob Osiason, a 22 year-old investor with two years of experience trading equities and options not only provides a unique insight into current trends in financial markets, but has also outperformed the current market posting a gain of 47.52% YTD while the S&P 500 finished off 2020 with a gain of 16.26% YTD.

Robinhood Era

While there are a number of factors that have led to this market boom, something that is certainly worth noting as a driving factor for these insane valuations and stock market performances are largely due to the popularity of investing apps such as Robinhood or Webull. Dubbed “Robinhood traders” these individuals tend to be young investors new to the market; as such, they are investing and trading into companies without doing research and due diligence. For example if Tesla is in the news, Robinhood traders will likely move into Tesla, resulting in the stock trading over its average volume thus driving up the price and company’s valuation. While this could pose some benefits to companies, it creates an inaccurate representation of the true economy in addition to potentially culminating in a stock market bubble.

An even more interesting trend currently emerging is the increasing number of individuals on platforms such as Robinhood trading options as well as the increasing amount of services offering alerts for swing trades, an option strategy in which one attempts to profit from smaller intra-day stock price movements. Options are far riskier, complex, and take a deep level of understanding. Given that the majority of Robinhood’s users are relatively new to investing options certainly are not something an inexperienced investor should be trading. With the thrill of returns, young and inexperienced investors continue pumping money into the stock market.  

Going Forward

While investors used to value companies based on what they may be worth in roughly six months, investors appear to be gauging their valuations based on a 1-2 year time frame. Instead of looking at the here and now, analysts and investors are looking at companies’ with a post-pandemic perspective, many expecting a rebound that will match current prices. A perfect illustration of this are the valuations of stocks in the EV sector such as Blink Charging Co (BLNK) which has yet to report a quarterly profit and is trading at $47.10 per share, up 2,212.68% YTD largely in part due to momentum. Once people return to spending and normal life, many analysts are expecting a rebound that will match current prices. While it may seem difficult to find value in the current market, there’s always money to be made, red or green, one just has to play it right and ensure to hedge risk.

Issues By –
Name – Jacob Osiason
E-mail – [email protected]
Company – VIP Value LLC
Country – United States