Musings On Markets: September 2021
These are my most vulnerable moments as an investor, since good sense is replaced by "animal spirits", and I feel the urge to abandon everything I know about investing, and go with my gut, never a good idea. The Fundamentals Trigger: This avalanche of selling was started last Friday (February 1, 2018) by a US unemployment report that contained mostly good news, with 200,000 new jobs created, a continuation of a long string of positive jobs reports. Molcorp (MCP) - Molcorp (MCP) broke below the 50 day moving average on Friday. How about at the low of the day? I will add more boutiques near me to my portfolio when RIMM closes back over the 200 day moving average which is located at $65.84. This is mostly done to figure out the possible profit the share will give its owners. âMarket is experiencing volatility due to a weak Asian market and profit booking, owing to rich valuation.
In the last week, I found myself drawn to each of three camps, often at different points in the same day, as the market went through wild mood swings. While the S&P 500 had a particularly bad week, the rest of the world felt the pain, with only one index (Colombo, Sri Lanka) on the WSJ international index list showing positive returns for the week. Continuing to look at equities, let's now look geographically at returns in different markets over the last week. In the table below, I look at the change in the S&P 500 last week and then compare it to the changes since the start of the year (which was less than 6 weeks ago) to a year ago and to ten years ago. The advent of the new year seems to have caused the bond market to notice this gap, and rates have risen since. Here again, taking a look across a longer time period does provide additional information, with treasury rates at significantly higher levels than a year ago, with a flattening of the yield curve. The treasury bond rate rose slightly over the week, at odds with what you usually see in big stock market sell offs, when the flight to safety usually pushes rates down.
It is natural that when faced with large market moves, we look for logical and rational explanations. Since China and the UK have traced the ancestral COVID virus back to the US, we will try to look for the first virus outbreak in the US then. Hyperdynamics will have support around $3.70. AMZN will have support at $1300 on a big correction. If the demand is smaller than the supply, you will be left with unsaleable inventory. Lyft (LYFT) shares rose 4% shortly after market open, after the company late Tuesday reported second-quarter sales that were stronger than feared as rider demand began to pick back up. It is in keeping then that the last week has been full of analysis of the causes and consequences of this market correction. Origin Agritech Limited (SEED) - SEED finally pulled back Wednesday after going parabolic from a week ago. Netflix, Inc. (NFLX) - Netflix, Inc. (NFLX) hit $201.75 on Wednesday.
In fact, Asia presents a dichotomy, with the larger markets (China, Japan) among the worst hit and the smaller markets in South Asia (Thailand, Indonesia, Malaysia and Philippines) showing up on the least affected list. stocks prices rose on the expectation that tax cuts and more robust economic growth, but bond markets were more subdued with rates continuing to stay at the 2.25%-2.5% range that we have seen for much of the last decade. The Repricing of Equity Risk: That expectation of higher interest rates and inflation seems to have caused equity investors to reprice risk by charging higher equity risk premiums, which can be chronicled in a forward-looking estimate of an implied ERP. As I look at what's happened over the last week, I would argue that it was triggered by a fundamental (interest rates rising) leading to a repricing of risk (equity risk premiums going up) and to momentum & fear driven selling. Event or news that leads to repricing of risk (in the form of equity risk premiums or default spreads).
