The S&P/ASX 200 (ASX: XJO) broke records during the week, briefly breaking 7,300 points on Friday and finishing the week 1.6% higher.
As always, here are my three key investor takeaways.
Know what you own
The resurgence of the ‘meme stock’ rally once again brought focus on the growing use of passive investments around the world.
Unbeknownst to many, both AMC Entertainment (NYSE: AMC) and GameStop (NYSE: GME), which have seen returns in the thousands of percent in a short period, are actually among the largest holdings in the Russell 2000 small cap index.
Given the incredible volatility and clearly struggling business models, there is little doubt most investors would be seeking to avoid rather than hold them as their largest exposure. It always pays to look beyond the label.
Headline data is not all it seems
This follows onto my second takeaway, which is that headline data and forecasts are not all they seem.
The week saw Australia among the world leaders as GDP increased 1.8%, yet expectations through 2020 were that our record-high savings rate would reduce, offering a perfect opportunity for Australian retail spending.
With the savings rate still at 11.6%, down from 12.2% last quarter, this hasn’t quite come to fruition.
Follow the leader
Finally, after a week of presentations, and some paternity leave, there appears to be somewhat of a ‘follow the leader’ view in markets, with consensus building around everything from monetary policy to ‘transitory’ inflation and ESG.
I’m wary of anything where ‘experts’ agree and believe a more active approach than ever is warranted given the very unique conditions.
