Stocks are set for soft open here on Friday after two days of dealing with a slew of initial public offerings (IPOs) and secondary offerings. The offerings were a perfect excuse for some corrective action as they sopped up some excess liquidity, but the continued optimism of the bulls was impressive. Not only did the huge IPOs from DoorDash (DASH) , Airbnb (ABNB) and several others trade sharply higher, but the pockets of strong stock-picking momentum also continued in various secondary stocks.
Market players are still anxious to put more capital to work and they still have plenty of capital to throw at this market. It is impressive action in individual stocks, but the frothiness of the action in places understandably is making some people nervous.
There is some early weakness this morning but this appears to be mostly due to worries over a "no deal" Brexit. This issue has been out there for so long now that the market mostly ignores it, but there is some increased concern now that the U.K. will exit the European Union on Dec. 31 without a deal. Morgan Stanley says it expects London's FTSE Index to drop 6% to 10% should that occur. European banks are down sharply on this concern.
That worry is spilling over to the U.S this morning, but this is the sort of news that U.S. traders seem to shrug off very quickly. There is concern that Congress is still dawdling in reaching a fiscal stimulus deal and there is concern about the continued increase in Covid-19 cases, but market players continue to look ahead to a vaccine and a reopening of the economy.
With a bit less than three weeks left in the 2020 calendar year, seasonality favors the bulls. That, combined with the continued interest in hot sectors such as special purpose acquisition companies (SPACs), the huge moves by the IPOs and fear of missing out, is keeping the uptrend going. There was a brief pause this week, but that is likely to be more positive than negative as it has helped to slightly cool off some of the excesses in the indices and some areas of the market.
My game plan remains unchanged. I'm going to stay aggressive with stock picking and will work hard to protect gains. I see no reason at this point to anticipate a significant shift in the character of the action.
Bitcoin is being hit fairly hard, which may be a sign of some cooling in speculation, but the SPAC deals keep coming and there are some huge moves in that group. SPACs will remain the vehicle of choice for aggressive traders.