How Confused Is the Stock Market?

North American markets today, Friday, viewed several hours before opening at 9:30 a.m. EST, look set to start in the green as major indicators including the S&P 500, DOW and NASDAQ are all positive at time of writing. The S&P however, looks somewhat uncertain and it is possible – though not a given – that it could sink into the red during the morning. The safe havens of gold and silver are up as are the British pound, Euro and Canadian dollar.

This follows a rally of sorts yesterday afternoon, helped by recovery hopes, American President Joe Biden’s vaccine targets, and declining numbers of unemployed claims now at a one year low, a development interpreted by many as a sign of growth to come. The rally came late in the day and in a masterpiece of understatement one analyst described the situation. “It’s a very confused stock market. There isn’t real leadership,’ said Tim Ghiskey, chief investment strategist at Inverness Counsel in New York, according to a Reuters report. “One day cyclicals are in favor, the next day, it’s tech-plus is in favor,” he said. “But on the positive side there isn’t what I call aggressive selling.”

European markets are open at time of writing and all indicators there are positive and appear likely to stay that way for the remainder of the European trading day. Europe’s slow vaccination rates don’t appear to be a major effect.

In previous editions of this column, I have suggested some factors affected by the recent market tumult and pandemic that need some serious thought. Today I am going to suggest several other decisions that may need visiting or revisiting.

Some investors face difficult decisions over individual stocks and a prime example is GameStop Corp. It started the year in the $17-$19 range but as a result of the Reddit-fueled trading frenzy shot up to a totally unrealistic high of $483 on January 28.

Until two days ago, analysts’ target prices for the stock ranged from $33.00 at Telsey Advisory all the way down to $10.00 at Merrill Lynch and even down to $3.50 at Credit Suisse.

Since the January frenzy, some investors have had to face a choice of selling at a loss or hanging on indefinitely in hopes of eventually breaking even and neither option seemed appetizing.

Then came the ratings shocker.

Analysts at Jefferies Financial Group raised their price target for the stock to an eye-popping $175, an astounding call when set against the target prices of other analysts. Jefferies analysts Stephanie Wissink and Anna Glaessgen reason that GameStop’s move to online sales justifies the change.

The stock closed $183.95 yesterday, up $63.61 on the day and after reaching $187.50, clearly propelled by the Jefferies rating change. Investors who bought GameStop shares during the Reddit frenzy and the aftermath will still have to decide whether to hang on and for how long but more of them may find themselves at the breakeven point much sooner.

Individuals grappling with broader life decisions may need more time with their financial advisors and these times may make the role of the advisor broader and more complex as the recovery takes shape. For many investors, retirement plans may need revision. Previously, retirement planning including what is sometimes called the glide path was simpler. By glide path I mean the period of approximately 18 months where serious retirement groundwork is undertaken. Formerly, the individual would take stock of which company benefits would carry over into retirement, what additional arrangements had to be made, the amount he/she could expect from a company pension plan, perhaps renew a mortgage and obtain a line of credit while still gainfully employed and even make serious travel plans.

Now many individuals have had early retirement thrust upon them through company layoffs and furloughs or are wondering whether their jobs will be available when the economy recovers. In many cases, firings and furloughs have played havoc with pension plans and applying for a mortgage or line of credit while not gainfully employed is not an appetizing proposition. Notwithstanding low mortgage rates some unemployed have found it difficult to keep up their payments. Some investment portfolios have suffered during the pandemic and earlier retirement projections may also need revision. Many individuals have had to make previously unplanned dips into carefully nurtured retirement savings just to continue paying expenses normally covered by salaries. That too, has disrupted retirement planning.

As far as travel plans are concerned, we may have to re-think the image of the couple dressed in white linens dancing on the sun-drenched beach.

Until the pandemic smoke clears further, travel plans are suspect, but vaccinations mean that the hesitation does not need to apply across the board, according to travel podcaster and columnist Ron Pradinuk. While in earlier years safe travelling may have meant checking a country’s crime statistics, road quality and hotel rates it has grown to include the vaccination situation at the destination. Pradinuk says that travelers will pick destinations which have the best records of COVID success.  “Thailand has reduced its quarantine down to 7 days for vaccinated visitors,” he says. “(It’s) still not perfect but a sign of opening.” Taiwan also has an excellent vaccination record. By comparison, Brazil’s vaccination record would not make it an idea travel destination.

Somewhat ironically, inducements from tourism operators will go well beyond gift certificates and free drinks. Tour operators, cruise lines, and hotel owners will use the vaccination records of their staff as reassurance and all guests will have to show proof of vaccination, Pradinuk says. All of that being the case, the choice of retirement travel destination becomes a matter of COVID planning as well as preferences and costs.

And on a roader note, worth considering is that Wall Street continues – for now – being ahead of Main Street as record gains counterpoint with huge job losses, many of which cannot be recovered. Whether Main Street can catch up is the million-dollar recovery question.

We all have a lot to think about in the post-COVID world.

Related: What Investors Need To Think About This Week