<\/p>\n
Since the beginning of July global stock markets have been self-immolating using the fires of fear.\u00a0 A little bit of uncertainty and bad news was tinder for outright panic on many trading days.\u00a0 In fact, since the 7 July, 2011 peak the S&P 500 has fallen 16.95% as of yesterday’s close.<\/span><\/p>\n Unfortunately, all of that selling created a lot of smoke; smoke that obscured the actual real news of the U.S. and global economy. In short, no one was paying attention to the facts of the situation.\u00a0 So has the smoke cleared?\u00a0 And have the fires stopped?<\/span><\/p>\n I feel that the fear fires have nearly burned themselves out.\u00a0 There remains a palpable sense of nervousness on the part of many investors.\u00a0 But those who were motivated to act on bad news seems to have acted already.\u00a0 Instead, what is left is not smoke, but fog.\u00a0 What does that mean?<\/span><\/p>\n It means that the fear has given way to obscurity.\u00a0 No one is really sure what the grand effect will be from all of the selling that took place over the past two months.\u00a0 Will the economy ride it out?\u00a0 Are consumers going to alter their behavior based on the panicked selling of large institutional investors?\u00a0 Have businesses gotten cold feet and started avoiding growth mode and re-entered self-protection mode?\u00a0 Has the U.S. government loosened its political gridlock?\u00a0 Have the Europeans staved off their debt woes?\u00a0 And so forth.<\/span><\/p>\n There are a lot of unanswered questions currently; questions that can only be answered with data.\u00a0 But this is substantially different than panic selling.\u00a0 Emotions have been replaced by a willingness, not to act on innuendo, but a reflective moment.\u00a0 That means that outright irrationality has given way to increased rationality.<\/span><\/p>\n Ideally stock market investing responds to the news of the day, not the fear flavor of the month.\u00a0 And that seems to be where we are right now: wait and see.\u00a0 Wait for the data then act.\u00a0 Don’t read these comments incorrectly as fear is still the predominate mood.\u00a0 If the economic and business data of the next several weeks is negative expect more panic fires and more smoke.\u00a0 If the economic and business data is positive, especially surprisingly positive, then expect an even bigger shift from fear to consolidating rationality.<\/span><\/p>\n I have given several radio interviews over the past several weeks and the general tone from the general public seems to be one of fears of a proportion smaller than that of the professional investors.\u00a0 Even more importantly, I sense more confusion, outrage and disinterest than I do fear.\u00a0 This latter category – disinterest – is exactly what I hope for the financial markets going forward.<\/span><\/p>\n As I have written about before the Great Depression created an inaccurate mythology: a stock market crash is what caused the Great Depression.\u00a0 Unfortunately, this bit of bull has ingrained itself on the collective consciousness of the First World.\u00a0 Consequently the public views the rise and fall of equity values as an indication as to the health of the economy.\u00a0 To some extent this is true.<\/span><\/p>\n However, most trades these days are executed based on sophisticated computer algorithms that instantaneously calculate a response to the flow of other traders’ calculations and responses.\u00a0 In other words, financial markets experience shocking volatility, not driven by news, but more by volatility itself.<\/span><\/p>\n Enter a few fearful institutional investors at the margin and momentum becomes tsunami.\u00a0 This is why small trading volumes can generate such wild swings in total value.<\/span><\/p>\n In other words, it’s been a long time since the day’s trading volume was a truly accurate reflection of the underlying economy.\u00a0 Instead most trading is a reflection of the momentum already present.\u00a0 This is especially true when there is a lack of economic data to create a motive force behind the momentum.\u00a0 Remove the marginal trader responding to fear and the markets tend to go sideways.<\/span><\/p>\n In conclusion, we are awaiting the next motive force: real economic news – that will determine all the rest.\u00a0 We have moved from fires of fear to the fog of data obscurity.<\/span><\/p>\n Jason<\/span><\/p>\n","protected":false},"excerpt":{"rendered":" Since the beginning of July global stock markets have been self-immolating using the fires of fear.\u00a0 A little bit of uncertainty and bad news was tinder for outright panic on many trading days.\u00a0 In fact, since the 7 July, 2011 peak the S&P 500 has fallen 16.95% as of yesterday’s close. Unfortunately, all of […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-4681","post","type-post","status-publish","format-standard","hentry","category-the-blog"],"_links":{"self":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/4681","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/comments?post=4681"}],"version-history":[{"count":0,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/4681\/revisions"}],"wp:attachment":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/media?parent=4681"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/categories?post=4681"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/tags?post=4681"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}