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Correction? Too Many Inexperienced Investors Are Plowing Into Stocks

Global Stock Market
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EDITOR NOTE: Too many “inexperienced” investors jumping in, Citi says. If stock prices represent how investors anticipate a company’s earnings, then what are we to say about droves of inexperienced investors moving as one herd and in one direction (often “long”) based not on estimation but pure sentiment or popular recommendation? This is what drives meme stocks, by the way. Experienced investors typically understand their market theses may be incorrect, so they scale in carefully, and many of them will even scale in more should the market move against them. Inexperienced investors are vulnerable to panicking when the market goes against them, for they haven’t done the proper calculations, or they entered the market without a sound strategy.  This is the basis of Citi’s assessment of the markets. Hence, they’re expecting a strong market correction once the right catalyst sets the plunge in motion.

Shares are soaring round report highs amid sturdy second-quarter profits effects, however Citi believes the marketplace is liable to a ten% correction, due to newbie traders piling into speculative generation names.

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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