Retail Investors’ Sprint Runs Into Headwinds
Technicals have been carrying the stock market higher, but it is becoming a heavier burden.
The second wind is going to be tougher.
Photographer: Jonathan Ferrey/Getty Images
The rhetoric repeated frequently and loudly in the marketplace lately is that stocks “just want to go higher.” This highlights the leading role played by market technicals, or what I think of as determining the path of least resistance for risk appetites.
Fueled most recently by the robust involvement of retail investors, these technicals first turbocharged a rally triggered both by corporate and economic fundamentals that were better than expected and consistently supportive monetary policies. Then they were instrumental in brushing off one new troubling question after another about these same fundamentals. Finally, they helped tip a stalemate between fundamentals and policies in favor of already-elevated stock valuations. But this is becoming a heavier burden, especially as more of a spotlight is placed on their dynamics.