Weekly Report | Desired Corrections

More indicators correlate expectations of the reality experienced in American and world markets. The Asian markets, Hong Kong and Shanghai, have been undergoing prolonged corrections for almost a year.

Alibaba, for example, has already lost 53% of its stock value. Nio – Chinese electric car manufacturer and self-employed – it has lost 41% of its market value since January 2020. Tencent, China’s largest and most used internet services portal, is also taking a 42% loss this year. These are just three examples of the widespread correction that has taken place in major Asian markets.

The issue of correction does not only involve the overvalued prices that the assets were at, but mainly the irrational characteristics of a large part of the individuals operating in the markets. They allow themselves to be elevated by exacerbated greed and forget the intrinsic Fair Value that is behind each asset. I always consider it a behavioral and rational issue – little else. In fact, the greater the level of short-term volatility, the more accentuated and aggressive the corrections and valuations of these assets will be. In this scenario, individuals who seek Fair Value in their acquisitions benefit, abusing their purchases during periods of extreme volatility.

Analyzing the latest most interesting indicators, there is a slight correction highlighted in recent months in the American market, but still far from adequate.

According to the chart above, in 2021, the percentage of stocks that are in a longer bearish trend quickly touched the 60% point. It is shown that there are few advantageous alternatives to buy assets at Fair Price or undervalued.

Above: we can get a slightly sharper downward correction – estimate until mid-October, and could reach 4100 points, before a new uptrend formation. The red line already shows us clearly how the correction is reaching its expectations according to the index averages.

A imagem acima é uma das maiores ABERRAÇÕES que já vi nos mercados financeiros nas últimas décadas. Analisando de maneira simples e objetiva: até o estouro da Bolha da Nasdaq, em 2001, as dívidas do Governo Federal americano (Linha Azul Escura) era quase imperceptível – ou corrigível. A partir de 2001, o aumento exponencial da dívida se agravou absurdamente no crash de 2008, chegando a níveis assustadores com o crash do Covid. O déficit econômico em 2020 alcançou níveis mais baixos desde a Grande Depressão, em 1930. Porém, a emissão de dinheiro sem lastro pelo Banco Central americano causou uma super inflação dos ativos que compõem os mercados.

Espera-se, por outra perspectiva, que haja ainda uma correção um pouco mais acentuada do S&P500 para aproximadamente 4100 pontos – ou abaixo – dependendo da correlação com a racionalidade comportamental dos indivíduos que atuam nos mercados.

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