Are Investors Chasing Bubbles?

Are investors chasing bubbles? The stock market's behavior is certainly “frothy” and dynamic this year. Gains of two or three percent in the indexes one day are followed up by losses of equivalent amounts the next day. And if there is a run of consecutive days of index gains one week, they seem to be followed up by a streak of index losses the next week. It almost seems as if the market is possessed by a kind of mob mentality, as investors (and firms) jump from one stock to another, and in and out of stocks, in search of profits.

Here are some recent examples of stock and index peaks. BTC – Bitcoin peaked on December 11, 2017. DOW and S&P indexes peaked January 26, 2018. NASDAQ 100 and Russell 2000 indexes may have peaked on June 20, 2018. It doesn’t look like the famous FAANG stocks have peaked yet, as Facebook (FB), Amazon (AMZN), and Netflix (NFLX) all hit 52-week highs today. In fact, a recent article on CNBC showed that a mere three stocks (Amazon, Netflix, and Microsoft) have driven over 70% of both the S&P and Nasdaq 100 gains this year.

In these risky and somewhat dangerous times, you should be asking yourself – is it a good time to be in the Stock Market? Even if there are few better alternatives, given the returns on cash in a bank account, is it worth the risk to your financial and physical health to squeeze the last bit of profit out of the current bull market?