After trading on Monday morning, futures show that the stock market will start the week just below its all-time high. This is because more and more bullish calls are coming in.
John Stoltzfus, chief financial strategist at Oppenheimer Asset Management, is said to have set a 7,100 target for the S&P 500 SPX +0.25% by the end of 2025. This would be the highest goal on Wall Street.
It looks like there is a lot of holiday cheer. Marco Iachini, senior vice president of research at Vanda Research, and Lucas Mantle, vice president of data science, say that even though there was a jump in investing around election time, people aren’t really excited about it now and things are just following the normal seasonal trends.
The Vanda team wrote in a note released over the weekend, “Overall, inflows in November and December are subdued relative to full-year averages. However, we can still expect retail traders to ramp up short-term purchases a couple more times before the end of the year—typically in the first days of December (when this was written) and then right before the Christmas break.”
The Vanda team says this shows that investors’ feelings aren’t all the same, which is usually a good sign for risky investments.
But there’s a problem: Vanda says that small investors are still doing a lot of business in “riskier pockets of the markets.” For instance, moves into small caps IWM +0.36% have sped up again at the start of December, while crypto-related stocks and exchange traded funds that showed signs of profit-taking around Thanksgiving have turned around.
Vanda says that if present flows look like the December 23–January 24 spike instead of the one in the first quarter of 2014, then buying could keep going strong in the new year, especially leading up to the January 20th inauguration, which could be a “sell-the-news” event.
The biggest relative rebound in speculative activity has occurred in bitcoin investor MicroStrategy MSTR +2.23% , notes Vanda, illustrated by a surge in out-of-the-money call options and the buying of levered long ETFs in the company MSTX +4.09% MSTU +3.97% . Buying MSTR-leveraged ETFs has gone up at the same time that buying similar products on stocks like Nvidia and Tesla, which are pretty risky, has gone down.
Vanda says it’s a bad sign when speculative ideas turn into highly speculative ideas. “Looking at things from the top down, retail participation still seems to be pretty good.” But a bottom-up look shows that people are acting in riskier ways, and some parts of the retail world could be hurt if the overall risk environment is hit by a growth or policy surprise, they say.
“The YOLO crowd remains active in pockets of the market, but for now, the risks are still not systemic. Watch any sudden reversals in MSTR price action as that could spark contagion across the crypto TradFi space,” they conclude.
