Three explanation why a “good storm” hits the market

Amanda Agati of PNC Financial sees three reasons for the speculative excitement of the market: no commission trading, low interest rates and another round of stimulus checks.

Together, the company’s chief investment strategist calls them a “perfect storm”.

“The surge in no-commission trading, a la Robinhood and a number of retail apps has undoubtedly added fuel to this fire,” she told CNBC’s Trading Nation on Friday. “Also, the low interest rate environment in which we continue to find ourselves has made the cost of significant risk pretty reasonable.”

According to Agati, the timing of the huge short bruises on stocks like GameStop and AMC Entertainment via Reddit and other chat rooms is no accident.

“The last bit of it and nothing at all to discount are really the stimulus checks,” she said. “The ones that hit the market in the first week of January, and then the surge in options trading in the last few weeks [is] very, very connected in our view. “

Agati, who manages $ 170 billion in assets under management, predicts the speculative mania will subside as the country’s economy reopens and the coronavirus pandemic subsides. She believes tremendous support from individual investors jumping into stocks to raise prices is a side benefit of staying at home.

There is a risk on their watchlist, however.

“While we are always concerned about this spillover effect, it remains very limited for a narrow subset of stocks, at least for now,” said Agati.

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