Markets Fear of Missing out, Early Indicators and Katie Woods

7 de dez. de 2021

The markets continue to be dominated by FOMO (fear of missing out) - the fear of missing out or not being in time. Skip the correction or do not have time to buy at a cheaper price. As a result, we have a day of massive sales, or active purchases. Despite the fact that nothing happens in the fundamental background - everything is the same, everything is in the same place.

Trying to predict something in such conditions is an almost impossible task. Therefore, we will simply continue to stick to the facts, ignoring the annoying buzz of analysts trying to adjust to a specific price fluctuation.

Let's start by explaining why the markets rallied yesterday. The main reason is the hope that the omicron will be less lethal, that is, the course of the disease in his case will be milder than, for example, with the delta strain. Preliminary figures from South Africa have confirmed this. And everyone rushed to buy.

At the same time, no one was interested in the fact that the sample was, in fact, unrepresentative: 166 cases. Yes, the States alone now generate more than 100K diseases per day. In this regard, 166 cases are not even a drop in the ocean.

But the main thing is not this, but the fact that the sample itself is not indicative - the majority of those in it are children or young people who, with any of the previous strains, had a milder form of the disease. That is, as we can see, it is even more early to please. This means that it is more than wrong to perceive yesterday's movement (the growth in demand for risky assets and the exit of their safe-haven assets) at face value.

More objective reasons for the joy of those who like risky assets were the decision of the Central Bank of Australia to leave the rate unchanged at an ultra-low level and at the same time not to start tapering yet. Or the data on China's trade balance, which showed higher growth in exports and imports than forecasted. Or the decision of the Central Bank of China to lower the bank reserve ratio in order to increase liquidity in the country's financial system. But just a few people paid attention to this.

In general, we prefer to keep an eye on some atypical predictor indicators. For example, every time El Salvador decides to bribe Bitcoin, the cryptocurrency market loses 10% -20% of capitalization. El Salvador bought 150 Bitcoins last week - open the crypto chart after that.

And for the US stock market, we use the dynamics of Katie Woods funds. If the Arches fell, we should expect a decline in the US stock market as a whole. In general, Katie Woods is an extremely vivid illustration of the fact that you can earn a lot in the financial market. But to continue earning at such a pace, or at least to keep the earned, is a task of a higher level of complexity and the overwhelming majority cannot cope with it. For a number of positions of Katie Woods funds, the return in 2021 (relative to the maximum marks) is minus 70-80%. That is, not only the entire profit of the last year has been eaten up, but also half of the base investment has been lost. So, in the long term, a specific statement of a specific trader is really not worth much.