Millions of stock market dramas boil down to a glut of supply – fr

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Millions of stock market dramas boil down to a glut of supply – fr


Anguish has been the history of the stock market lately. It’s skyrocketing, it’s plunging, and all the while, investors worry about extremely high valuations and dump into data to figure out when inflation will bring down the house of cards. But sometimes, like now, the problem is much simpler than that: too much supply and not enough demand.
The companies raised more than $ 170 billion through initial public offerings on U.S. stock exchanges in 2021, according to data compiled by Bloomberg. IPOs are so strong they’re on track to surpass last year’s $ 180 billion, the most since at least the 2008 financial crisis.

But as the market has voraciously consumed the start of 2020, tastes are changing. The Renaissance IPO ETF (symbol IPO), which tracks new state-owned companies, is down 9.3% this year after soaring 107% in 2020. While the market as a whole has held up so far, there is still a threat. presents a seemingly endless supply of stocks crushing the precious demand. Yes, the S&P 500 is up almost 10% since the start of the year. But it has fallen almost 2% from the all-time high it reached earlier this month.

“There’s definitely something about the idea that demand for stocks is moderating,” said Nicholas Colas, co-founder of DataTrek Research. “The IPO window is always wide open until it closes with a bang. This makes it a part of the market that corrects itself automatically. “

The flow of funds reflects this diminishing appetite. While exchange-traded funds have taken in $ 288 billion since the start of the year, the largest – the $ 355 billion SPDR S&P 500 ETF Trust (ticker SPY) – lost $ 12.5 billion.

Even with IPOs at a record pace, the recent stock market turmoil is starting to scare off some potential issuers. At least two planned lists have been delayed this month due to volatility. If this were to become a trend, or if the debut started to be canceled, that would be a worrying sign, Colas said.

“When deals start to close, you’ll know the supply side of the market equation is starting to reset,” Colas said.

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