The market is moving towards euphoria, despite the pandemic toll

“It’s not as obvious a bubble as it was 20 years ago,” said Jay Ritter, a finance professor at the University of Florida who studies initial public offerings. “But we are close to the bubble territory.”

The market appears to be overheated by another indicator that investors often use to determine how cheap or expensive a stock is: its price in relation to the profits it expects to make. Currently, the so-called price / profit index for S&P 500 companies is above 22, and has been for most of the year. The last time the market was consistently above that level was in 2000.

The appetite of individual investors was an unexpected by-product of the pandemic. For many, stock trading began as a way to quench their speculative itch when other avenues, such as games of chance, were effectively closed.

Tim Mulvena, a 32-year-old medical software vendor from Oneonta, NY, was one of them. He first accessed Robinhood, a free-trading application popular with small investors, in March and started buying shares while markets were collapsing.

“I have to move and see where it takes me,” said Mulvena.

He made gains of about 60% at Apple, his biggest position. And his investment in Penn National Gaming, a regional gambling company that bought Barstool Sports, a digital sports website that Mulvena was a fan of, more than doubled.

Even those who remained with less active investments – such as 401 (k) investors who earnestly contribute to plain vanilla index funds – have gained from the upward trend in the market, attracting new income. Bank of America Merrill Lynch analysts recently cited “sparkling prices, greedy positioning” as the reason for huge inflows into stock market mutual funds and exchange-traded funds in the past six weeks.

As they did in the 1990s, smaller investors are pouring money into technology-focused fashion companies, many of which saw their businesses gain strength during the pandemic. His favorites include cloud computing software maker Snowflake, online surveillance company Palantir and energy storage company QuantumScape, which increased 144% in December alone. Investors also like Etsy, the online market, which has grown 330% this year. Just over a week ago, 908 Devices – the maker of portable analytical devices – rose about 150 percent in its commercial debut.

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