Despite what many feared just after the Labor Day holiday, the markets did survive the FOMC meeting. There was considerable selling up through last Tuesday morning when a Wall Street Journal reporter?s comments apparently convinced the market that the Fed was not going to change its policy.
This sparked a rally that pushed the S&P 500 and Dow Industrials to further new record highs. It is too early to tell exactly who was selling on the correction but I would expect it came mostly from individual investors. At the early August lows, $16.3 billion came out of US stock ETFs and $2 billion out of mutual funds.
This has been the trend for most of the bull market as there has been a number of panic selloffs where many investors ended up selling near the correction low. It seems like there is always something new on the investor?s wall of worry.
Now it may be a too successful Alibaba IPO that will resurrect the bubble talk and keep investors on the sidelines. No matter what happens to the stock price down the road, I am sure this IPO record will last for some time. The average investor was unlikely to get any of the shares, which probably reinforces the view that the investment playing field is not level.
I would not be surprised to see a number of articles in the coming weeks that warn investors that the last time the IPO market was so frothy was just before the dot.com bubble burst in 2000. In Friday?s Wall Street Journal?s article Alibaba Mania Isn't Built to Last they warn that a sky high price of Alibaba Group (BABA) is likely not sustainable.
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