by Louis Navellier | November 26, 2013 4:00 pm
The stock market is at the start of the “holiday euphoria” season, but I keep hearing the siren song of the Scrooges out there, saying the stock market is “overvalued” and primed for a fall. Well, maybe they are half right: The small-cap arena is a bit frothy due to relentless marketing from aggressive indices, resulting in what appears a “valuation bubble” in fad stocks.
Since late September, however, there has been a clear flight to quality that has accelerated a bit in recent weeks due to the clear division between “hot” and “cold” third quarter earnings announcements. Scrooge is half right: If you own low quality stocks, with poor sales and earnings, you should be cautious. If you own frothy stocks like Tesla (TSLA), your bubble may burst as a flight to quality persists.
However, if you own fundamentally superior stocks with fair valuations, you can likely relax and benefit from ongoing institutional buying pressure.
Overall, we believe this is a good time to invest in quality stocks, as the stock market tends to rally going into the long Thanksgiving weekend. As we gather with friends and family to enjoy food and football, we tend to be upbeat. This optimism often rubs off on the stock market as investor sentiment tends to rise through January.
In other words, I expect to see a holiday rally starting this week.
I wish you and your family a wonderful Thanksgiving!
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