The U.S. stock market is facing a growing ‘wall of worry’ as concerns about irrational exuberance start to surface. The recent successful initial public offering (IPO) of Reddit has sparked fears that the market may be heading towards a period of excessive optimism, similar to what was seen in 2021.
Reddit priced its IPO at the top of its range and saw its stock soar on its first day of trading, closing 48% above its IPO price. This has raised red flags for some investors, as historically, the market tends to underperform when exuberance is high.
However, a closer look at sentiment indicators like the number of IPOs coming to market (NIPO) and the average first-day return of IPOs (RIPO) suggests that the current excitement may not be as concerning as it seems. Data from University of Florida professor Jay Ritter shows that both NIPO and RIPO are not at levels that would typically signal a major market top.
While there may be other reasons to be cautious about stocks, the overheated IPO market may not be one of them. So, for now, investors can take a breath and relax, at least when it comes to this particular warning sign.
Mark Hulbert, a regular contributor to MarketWatch, provides insights on the current market situation and offers a reassuring perspective on the IPO frenzy. As always, it’s important for investors to stay informed and cautious in their decision-making.
In conclusion, while the market may be facing some uncertainties, it’s essential to keep a level head and not get swept up in the hype. Stay tuned for more updates on the market and potential warning signals that may arise.
This news story was created by MarketWatch, an independent publication operated by Dow Jones & Co., providing valuable insights into the financial world. Stay informed and stay cautious in your investment decisions.
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03-30-24 1103ET
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