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In Malcolm Gladwell’s latest book, Talking to Strangers, he writes about the concept of alcohol myopia. It’s a theory that alcohol causes drinkers to focus on their immediate environment. As Wikipedia puts it, intoxicated individuals act rashly, choose overly simple solutions to complex problems and act without considering the consequences.
What does this have to do with investing? Well, right now it feels like we’re experiencing market myopia. Investors are focused on today, leaving the future for later. I’m not so much referring to the strength of the stock market, but rather all the stuff that’s going on around it.
Here are some signs that investors are getting intoxicated.
Extrapolating current demand
Companies that did well during the lockdown are generally expected to keep growing and profiting in the post-pandemic world, including home improvement stocks such as Home Depot Inc., Lowe’s Cos. Inc. and Best Buy Co. Inc., athleisure stocks like Lululemon Athletica Inc. and Nike Inc., and, of course, technology stocks.