The markets today, Tuesday, viewed several hours before opening, look set to continue moving upwards, following yesterday’s healthy increase. That flowed from renewed optimism over a COVID-19 vaccine. Some deal making also helped, including Oracle’s announcement that it would join with China’s ByteDance to keep TikTok operating in the United States (a deal that will require approval by both governments , which is not necessarily a given).
There are other unresolved questions that do not yet have clear answers, starting with fallout from the tech rout. Even given the turnaround, will the gut-wrenching drop spur a trend back towards value investing or even to keeping larger hoards of cash by some investors?
And was the rout merely – as some analysts have called it ‘a speed bump on the road to higher valuations’ or is it a hint of what is to come?
And what is – or will be -- the net effect of the huge influx of day traders, who have rushed to platforms – many of them commission-free – such as Robinhood? These traders have flooded these sites, drawn partially by the chance of seemingly ‘quick and easy’ money, partially by freebie arrangements, partially by large amounts of free time induced by furloughs and layoffs and partially by stay-at-home restrictions during the pandemic. We do not have enough data yet to know whether this type of trading has contributed to increases in valuations. The added activity may have played some part.