A new generation of younger investors became much more passionate about individual stocks and the capital market in general. The spike in call options volumes and the record amounts of margin debt corroborates the new source of demand for stocks and options. Tech companies like Amazon, Netflix, Peloton or Zoom benefited from new habits and from employees working from home. But after years of steadily surging tech share prices, the rise in interest rates has been challenging technology and defensive shares. By contrast, cyclical companies experienced a rebound based on investors’ move from growth stocks to value stocks.
The recent rise in government bond yields over the past month triggered a surge in volatility and a slump of as much as 11% in the Nasdaq100. Aided by vaccination success as well as economic recovery and consumer spending the selloff in equities has not taken place on a broad front. After U.S. President Joe Biden signed the $1.9 trillion stimulus package even the emerging-market equities rebounded from their recent selloff. Corresponding U.S. inflation risks remain low, said Treasury Secretary Janet Yellen. “Is there a risk of inflation? I think there’s a small risk and I think it’s manageable. I don’t think it’s a significant risk. And if it materializes, we’ll certainly monitor for it but we have tools to address it.”