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TSLA, SPCE and PLUG stocks are among those that may be rallying due to speculative trading. This phenomenon is known as a ‘late-cycle’ market.
TSLA, SPCE and PLUG stocks are among those mentioned by chief investment officer at Bleakley Advisory Group, Peter Boockvar, to have been significantly affected by crazy speculative trading. According to Boockvar, members of the infamous Reddit forum r/wallstreetbets rushed to buy these stocks in the past few months. Tesla Inc. (NASDAQ: TSLA), Virgin Galactic Holdings Inc. (NYSE: SPCE) and Plug Power Inc. (NASDAQ: PLUG) mentioning them in the forum thousands of times.
He continued to say that this kind of phenomenon is not new as it is a characteristic of a ‘late-cycle’ in the market. According to Boockvar, a huge correction on the stock market is due to happen since the prices have been reacting to pure future speculation instead of fundamentals like GDP and how the company is performing currently.
His sentiments were supported by CEO and Chief investment officer at Richard Bernstein Advisors, Richard Bernstein, who said that this kind of speculative trading is popular with a slow growth market and it’s a warning sign to investors of a possible reversal.
According to Bernstein, GDP growth in the last three quarters has performed below average and the yield curve is inverted. He told CNBC that corporate profits growth is 2% and we are talking about things like Tesla and Virgin Galactic as being the future. That’s very strange.
However, Boockvar noted that this kind of phenomenon does not necessarily mean it’s the end of the market cycle. Using the cryptocurrency example, he said that most crypto assets like Bitcoin have been rallying upward fueled by pure speculative trading. “Bitcoin you could have thrown out there as late-cycle”, noted he.
Speculative Trading Affecting TSLA, SPCE and PLUG Stocks
According to Boockvar, in the history of stock trading, there are names that never miss in the list of trading speculation. These are the people behind companies promising they could cure cancer, land people on Mars or moon, and in the broader spectrum, it’s a representation of risk appetite and people wanting to roll the dice.
Tesla, Virgin Galactic and also Plug Power stocks have all experienced enormous gains since the beginning of the year. Most either doubled or tripled the price in a very short span of time, clearly falling in the speculative trading category.
Boockvar said that ‘In a world right now where there is slowing growth, there is a search on for anything growth-related….and what’s cooler than electric vehicles and space?’
Wells Fargo equity strategist said that they are fascinated by the parabolic moves recently observed in Tesla (TSLA) and also in Virgin Galactic (SPCE) stocks. “One theory we think has some merit is that the seeds for these moves were planted back in October when online brokers cut the commissions to zero. Whereat the time few people predicted any real macro ripple from this change”, explained he.