Good Financial Reads: Stock Market Musings

Stocks of smaller companies have struggled under the weight of economic uncertainty from COVID-19 pandemic during 2020. For most of the year investors have preferred the safety and comfort of stocks in big, well-known companies, such as Apple and Amazon.

Yet in the last six months – and particularly since the election – there’s been a strong rebound in small cap stocks. A key driver of this new trend is the hope for a vaccine, which would fuel a new economic recovery.

With the widespread adoption of retail investing and the usage of handheld devices, investing and stock trading have become easier than ever. However, in the 1980s, it used to be an entirely different story. This week on Grow Money Business, we bring you an informative and entertaining conversation with a stock trading veteran who has been in the industry during many of the defining moments of the financial markets over the last four decades. Kenny Polcari, Managing Partner Kace Capital Advisors, joins us today to dive deep into how the stock market structure has evolved over the last few decades.

Last Fall we started talking about the prospect for higher inflation and what that would mean for the stock market. Our thesis was: if inflation moves higher, then stocks would suffer. Over the last year, we’ve certainly gotten a heavy dose of inflation, more than we would’ve thought. Yet stocks are sitting at all-time highs and are up over 20% this year. Is the link between (higher) inflation and (lower) stocks broken? We don’t think so. In this month’s letter, we lay out why we believe: 1) inflation will continue to surprise to the upside, and b) why stocks will eventually have to reckon with this inflationary reality.