Categories: Family Office, Financial NewsPublished On: June 7th, 2021Comments Off on Market Update – 6/4/202120.2 min read
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This week’s results left the S&P 500 and the Dow just shy of record highs set four weeks earlier. We maintain the view of the previous week and continue to observe whether the rebound can continue to hit a record high or bottom out. Based on what we have seen so far, it is more likely to see the stock market breaks the mid-May low than an all-time high in the short run.
AMC’s stock price has risen by 2,800% at one point this year. It rose by 95% on Wednesday and bringing its market cap to $28.17 billion. No one will doubt that AMC’s operating model has been challenged by many streaming services in recent years (Netflix, Disney +, HBO Max…). This is similar to GameStop which previously fell from the highest point of $483 to $40. Even if at the end it would rise to $1,000 as many Redittors claim, it is still extremely tormenting to watch your wealth ride up and down on the roller coaster if the exposure is large.
The Federal Reserve will soon begin selling off the corporate bonds and exchange-traded funds it amassed last year through an emergency-lending vehicle set up to contain the Covid-19 pandemic’s economic fallout. In fact, it is reasonable to end this plan when the market has stabilized, and it should be viewed positively. However, the market inevitably thinks that if the Federal Reserve will further tighten in the entire market (especially the Treasury market) to raise interest rates, there is a high probability that the global economy will return to recession. In that scenario, investing in multiple stocks is not enough to diversify risks (even the S&P 500 was down by more than 50% during 2007~2009). A proper asset allocation is necessary to control your risks.
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