[ [ [ bloggin space w i k i ] ] ]Difference between revisions of "The Stock Market"
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== Inflation and Lethargy == | == Inflation and Lethargy == | ||
The start of 2022 saw markets at all time highs - the last of the funneled money was being used, and the last buyers were still counting their unrealized gains. However, under the surface, something was sputtering out; the market was simply becoming tired. As with most cycles that target volatile markets, tech was the first to go, and the Nasdaq began to suffer a serious rout, exceeding monetary losses of even the pandemic dump. The pangs of encroaching inflation, reduced consumer confidence, and a toxic relapse from wildly increasing asset prices now struck investors, leading to more doomsday calls for a recession. The Fed, its back firmly against the rocks, could do nothing but tighten rates, as demand inflation from various events conflagrated into ever increasing prices for consumers. The old war of growth vs. value was back, with oil companies experiencing wild profits, while the <s>turds</> new paradigms of bloated tech began to nosedive. | The start of 2022 saw markets at all time highs - the last of the funneled money was being used, and the last buyers were still counting their unrealized gains. However, under the surface, something was sputtering out; the market was simply becoming tired. As with most cycles that target volatile markets, tech was the first to go, and the Nasdaq began to suffer a serious rout, exceeding monetary losses of even the pandemic dump. The pangs of encroaching inflation, reduced consumer confidence, and a toxic relapse from wildly increasing asset prices now struck investors, leading to more doomsday calls for a recession. The Fed, its back firmly against the rocks, could do nothing but tighten rates, as demand inflation from various events conflagrated into ever increasing prices for consumers. The old war of growth vs. value was back, with oil companies experiencing wild profits, while the <s>turds</s> new paradigms of bloated tech began to nosedive. | ||
[[File:clmarch22.png|thumb|right|Very normal movements of oil prices] | [[File:clmarch22.png|thumb|right|Very normal movements of oil prices] | ||
Revision as of 02:59, 1 July 2022
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The US equity market known more familiarly to the average SUV driving American as the stock market is a nebulous system of money harvesting, hedging, betting, buying, selling, and general fuckery that abounds perhaps our wildest imaginations.
The derivatives market
Unknown to the average mom and pop, the derivatives market of futures, options, swaps, and god knows what other satanic instrument pulls the true strings of the market, due to its inherently leveraged and occasionally illiquid nature. After the rise of payment for order flow and heavy commission reductions with US brokers, parts of this market have become more accessible to the general public, who predictably treat it as a legal glorified casino. Users like BallSac constantly search for the next 1000x instrument, which sadly is a criteria that happens daily in some part of the casino market.
The equity futures market, spanning the overnight hours between the markets close and opening bell, is responsible for nearly all movement of stocks in the last 10 years. How the entire market cap of most of the globe moves wildly in price due to an instrument that trades less than 10 contracts a minute remains a mystery.
Events
Election of Trump and 2017
In the latter part of 2016, equity markets were mostly done pricing in the victory of Hillary "the Hilldog" Clinton, given the relative absurdity of the Republican front runner. With a weak Chinese economy and general non-excitement for Democratic leadership, the indices entered a lethargic period of cooling off as November loomed. As election night carried on, the sudden revival of Donald Trump kicked open a surge of volatility in the futures market, as participants now had to actually consider such an actor winning the presidency. As the nail in the coffin for Dems panned out, the sudden realization that Republican policies could revitalize the economy gave way over the uncertainty of having a reality show host as president, and led to a general rally into year's end.
The following year was a period of unprecedented slowness and grind in the markets. Volatility fell to levels not seen in decades, prices barely moved on a day to day basis, and options premiums were non-existant. In the words of rapper Future, life was good for long holders of equities, especially those collecting large dividends. Even Fed hikes and budget struggles toward the end of 2017 could not stem the upward flow as companies reveled in the new environment. However, all things eventually come to an end.
Volpocalypse
January 2018 saw more aggressive upward moves in equities across the globe, continuing the trend set the previous year. In February however, several companies began to warn of the eventual effects of Fed hiking, combined with potential future slowdowns. Later that month, the markets experienced some down days. As volatility picked up, vendors of volatility products who normally rolled their underlying derivatives across expirations, had to do so under stressful and illiquid conditions. As it became apparent there were simply no offers for these products, panic selling and hedging in equities led to a huge run on the VIX, effectively flash crashing the Dow and eliminating a month of gains in the span of 30 minutes. Some products such as XIV lost so much value in the roll they were essentially delisted, and the suckers investors woke up to almost nothing in their coffers.
2018 and the Trade War
Following the collapse of the short volatility trade, the markets meandered through until the spring, erasing most of the losses, however, with a much more slippery structure. The equity indices would never return to the period of slow and safe movement as seen after the election, and took on a noticeably twitchy dynamic. At this point the Trump administration took China into its sights, setting off a tit-for-tat economic tussle, with tariffs and other punishing measures aimed at reducing the trade deficit, and supposedly reducing US dependence on foreign markets. Surprising no one, the equity indices generally went wild whenever trade war news revealed itself, either through infamous Trump tweets or after-hours releases.
Global growth, after a strong one and a half years, started to slump at this time. Combined with soft manufacturing data from the US, the continued offloading of the Fed's balance sheet, and the ongoing trade war, led the S&P to enter a volatile correction and eventually a mild bear market, erasing the entire year's gains, leading to a flat year and a waste of time for everyone. Seeing the shitshow unfold, the Fed began to sweat and hold off on its tightening, leading to interesting stupid bullshit recession predictions in the tea leaves of the bond market.
2019 - Cautious optimism
Following a rapid rally in January, investors began to realize that despite global risks, the American economy was still very strong. Despite morons financial advisors calling for caution, the market continued to rally into new highs, even as the continued trade war occasionally hampered events. Luckily, any "good" events in negotiations simply propelled the indices higher. It seems as if nothing could stop the juggernaut...
2020 and Corona
In late January, some rumblings were emerging of a new very infectious Chinese virus. Spooked as it was with anything China related, the market had some hiccups, until investors realized no virus in the past had ever done anything, and resumed hungrily buying anything they could get their hands on. Around this time, a few strange bouts of extreme selling were seen in equity futures, though they were attributed to dumping by informed insiders the random actions of hedge funds.
Of course, the virus did spread. Soon China closed off, then europe and the US followed suit. A general "sell fucking everything" soon followed as the S&P dropped over 30%, with many small cap, industrial, and energy companies losing over half their value. In a bout of extreme irony only seen in the cruel markets, the sectors already weakest after the period of subpar global growth were hit the hardest by the virus closures. The market eventually bottomed in late March off of a limit down day in the equity futures, as NYC covid hospitalizations had their first decreased percentage growth day. Volatility in this period was rivaled only by the 2008 crisis, with the markets nearly unusable by the average person during the entire drop.
Tech Dominance and the Everything Bubble
As fears of mass bankruptcy and bank contagion plagued the economy, the Federal Reserve was forced to open the taps enact rapid accomodative monetary policy, setting rates to almost zero and slurping up all sorts of junk bonds and other less than desirable credit instruments. While this environment likely prevented a drawn out recession, it also provided an ideal petri dish for ludicrous borrowing and multiple expansion. In the tech sector, where valuations were already considered "high", this phenomenon obviously took hold, sending the Nasdaq soaring to new highs and almost doubling from its pandemic bottom.
While settled companies such as Amazon and Microsoft benefited greatly from social pandemic changes, a bunch of dumb shit new paradigms such as SPACS, software as a service, apps of all sorts, NFTs, fake meat, countless subscription and delivery companies emerged as if out of the woodwork, sucking up the un-allocated money suddenly available in the market. Cryptocurrency even perked up again; Americans simply had too much money and nowhere to spend it. New IPOs soared as soon as anyone could press the buy button. Life was fast and the money was easy, the fears of the pandemic were already unknown to the large number of new dummies investors storming every market. The GME and AMC fiascos further created a class of distrustful investor; now blaming the Fed and brokers for what perhaps these institutions had initially crafted all along.
Inflation and Lethargy
The start of 2022 saw markets at all time highs - the last of the funneled money was being used, and the last buyers were still counting their unrealized gains. However, under the surface, something was sputtering out; the market was simply becoming tired. As with most cycles that target volatile markets, tech was the first to go, and the Nasdaq began to suffer a serious rout, exceeding monetary losses of even the pandemic dump. The pangs of encroaching inflation, reduced consumer confidence, and a toxic relapse from wildly increasing asset prices now struck investors, leading to more doomsday calls for a recession. The Fed, its back firmly against the rocks, could do nothing but tighten rates, as demand inflation from various events conflagrated into ever increasing prices for consumers. The old war of growth vs. value was back, with oil companies experiencing wild profits, while the turds new paradigms of bloated tech began to nosedive.
[[File:clmarch22.png|thumb|right|Very normal movements of oil prices]
Fears of "stagflation" led to pricing in of increasingly tighter monetary policy, leading to a stealthy dumping of US treasury bonds; these moves combined with equity underperformance there was nowhere to hide. As such an air of unconfidence and malaise took hold of many investors, as markets lingered and threatened to move ever lower, it seemed everyone was already in a recession that was not yet official. However as investors and gamblers retreated to lick their wounds, perhaps the market would once again spring into a new rhythm, as it does time and time again, when we are least expecting it.
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