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After a month in which Democrats won a surprising Senate majority, a mob stormed the U.S. Capitol, and an army of retail traders inflicted huge losses on hedge funds, investors may reasonably be asking: What’s next?

The risk rally that began with Joe Biden’s U.S. election win and positive vaccine news continued into January, bolstered by the Democrat’s Georgia Senate wins and China’s stronger-than-expected growth, a report from FTSE Russell said.

But the “initial exuberance” faded with vaccine delays, new virus mutations, pandemic lockdowns and a dramatic week on Wall Street led by retail investors united on Reddit.

“Rising downside risks to the global economic recovery and the additional volatility injected by retail investor trading in GameStop sapped market confidence as the month progressed,” the report said.

The S&P 500 posted a 1% loss for January after the steep sell-off last week, according to S&P’s monthly dashboard report. Smaller caps outperformed and volatility spiked “as the short squeeze frenzy mounted among retail investors,” it said. The S&P/TSX Composite index finished the month down 0.3%.

A report from Richardson Wealth noted that the market’s “manic tendencies have been building since the U.S. election.”

The report warned that we’ve reached “a critical moment in the market cycle,” with “speculative froth” stretching price-to-earning ratios for both the S&P 500 (22.1x) and TSX (16.6x).

“Despite hopes for a less eventful year, we may not be party to that pleasure after all if this month is any indication of what is yet to come,” it said.

Richardson Wealth pointed to a high number of stocks within the Russell 3000 index that have doubled in the past three months, and to surveys detecting bearish sentiment despite markets reaching new highs.

The AAII Bull-Bear index turned negative, dropping more than 30 points since the U.S. presidential election even though the market gained more than 5% over that period, the report said.

“Typically, these shifts in sentiment coincide with market sell-offs,” said Richardson Wealth. “In fact, looking back to 1999, we can only find three other weeks that had a similar or greater fall in sentiment with similar market returns.”

Even before last week’s developments with GameStop, Blackberry, AMC and others, some experts were warning about the signs of market excess as evidenced by the massive Bitcoin rally.

“It’s one thing for the market to anticipate an economic recovery, but so much has been priced in already and sentiment has become so one-sided that there are now pockets of froth in the market that are bound to create more volatility going forward as they get wringed out,” AGF CEO and chief investment officer Kevin McCreadie wrote in a Jan. 21 blog post.