Pullback in risk on – and that’s a good thing

3 Eyl 2020

De-risk! The market pulled back today on expensive tech stocks, overstretched valuations, with investors questions whether the stock market still has legs.

Steep valuations forcing a pullback

The FAANG stocks took the biggest hits as investors start to question their lofty valuations. Facebook and Apple are currently trading at 37 times price to earnings, with tech companies such as Salesforce and Zoom trading over 100 times their valuation. However, some consider this a healthy thing for the markets. Alec Young, chief investment officer at Tactical Alpha LLC, stated that “Frankly, the deeper the pullback in tech, the healthier it is for the overall market.” He further noted that the “market was overbought; too many people chased the tech names. It is all Healthy; the valuations have been stretched.”

U.S Dollar seeing gains on a pullback

The U.S dollar is set to record a weekly gain after a near ten-week downwards spiral for the greenback. However, with the Federal reserve continuing to pump liquidity into the markets, there are still plenty of headwinds against the U.S Dollar.

Take advantage of the pullback.

If you are an investor, try not to look at your investments to prevent any impulsive actions. Use this opportunity to buy your favorite stock for cheaper. Remember, this is a marathon, not a sprint.