Meme stocks are all the rage, with some amazing gains taking place. This week in the LPL Research Market Signals podcast, Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder break down what meme mania means for investors. They also take a look at how policy could impact things the rest of this year, while dissecting the recent weaker than expected monthly jobs data.
Ryan notes that higher taxes are coming, but even if the corporate tax rate jumps to 25% from 21%, the truth is—that is still one of the lowest tax rates since World War II. Jeff was quick to note that you can look at higher taxes, but the economic cycle matters much more. If the economy is strong, history says the stock market can do just fine as taxes increase. Ryan notes that higher capital gains taxes in late 1986 and early 2013 were two times that saw healthy economies and solid stock gains for at least six months.
What to make of meme stocks
AMC was the poster child for meme stocks last week, gaining more than 90% on Wednesday alone. Ryan points out many amazing stats on the price returns on AMC, but Jeff was quick to note that we’ve seen big gains before—it is just that this time many new investors are participating, so it is more news-worthy. Ryan is optimistic that, unlike in late January when GameStop mania took over and stocks sold off, this time stocks are right on the cusp of an all-time high. Clearly the big worry over which hedge funds are on the wrong side of these trades aren’t impacting things this time around. Ryan also notes that many investors are getting interested in investing due to the meme stock mania. Yes, there will be some potential big losses down the road, but many young investors are learning that investors can create wealth and hopefully this will mean many more investors are here to stay.
Goldilocks jobs data
The May nonfarm payrolls came in at 559k versus 650k, but stocks soared, gold jumped, and bonds gained big as well since the 10-year yield dropped. Ryan thinks it was a goldilocks report, as jobs were still a very impressive half a million, but it wasn’t so hot that the Fed would be pressured into hiking rates sooner. Jeff points out that a few years ago 300k jobs were considered good, so this report is still solid. He also mentions that as the economy continues to open up, we still could see some million plus jobs prints later this year.
Tune in now
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All index data is from FactSet.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This Research material was prepared by LPL Financial, LLC.
For Public Use — Tracking: #1-05151906 (06/22)