Weekly Report | Feelings

The ‘feeling’ factor directs, mostly, individuals to the same flow: emotional and behavioral factors govern, govern, these subjects, which by in turn, is reflected in numerous indices. The main question should be: is there demonstrably a strong enough reason to influence me for this flow?

Volatility is directly attached to flows, which in turn is intrinsic to the types of players that operate in these markets. With the advent of extreme technological ease, now inhabited by Artificial Intelligence, a huge number of players are entering this game called ‘market’: in its vast majority, individuals who cannot interpret a measly text; or that you have no idea of ​​”who you are” in the face of your own life.

Yes, in a way it’s sad to have to read and write, in my case, this kind of thinking. However, it would be cruel not to analyze the truths that involve sentimental volatilities: in this case, being characterized, dimensioned and summarized in GRAPHICS!

FEELINGS

‘Investor Sentiment’ is meeting the same low expectations as the beginning of the pandemic in 2020. I will not go into each previous report to describe every case in detail. It boils down to: if you are reading these writings; obviously he is alive and has overcome all the miseries that this illness has caused. The market resisted! Companies resisted.

Now there are other hysterias that absorb the emotional side of individuals, keeping them in an eternal loop between despair and euphoria: inflation, Federal Reserve, staginflation, supply chain, geopolitics, war. In case reader, put one thing in your mind:

EVERY DAY THERE WILL BE A NEW PROBLEM TO SOLVE IN YOUR LIFE, BE IT MACRO OR MICRO, DIRECT OR INDIRECT.

Therefore, the only alternative to have greater peace of mind in relation to the money invested is called sectoral “diversification”.

FEELINGS vs REAL ESTATE

Meanwhile, real estate assets hold low in relation to negative investor sentiment, as pictured above. The Red Line depicts exactly this moment; leading to excessive lows as in 2008 and 2020 – the biggest devaluations of REITs in blue markings.

THE PENDULUM

The chart above demonstrates the S&P 500’s history of assets, both ‘Value’ and ‘Growth’. Note that the correlation is very well defined in the Red Arrows, in which, since 2008, they indicate the peaks of overvaluation of assets following a strong correction of the markets. At the moment the S&P 500 is already reaching an oversold point, that is, many assets are already priced below the Fair Value.

While many assets are becoming real bargains, pessimism continues to hit the rational behavior of investors hard. The image above clearly demonstrates that we are facing a good “buy” movement, where the feelings of the subjects keep them hostage to pessimistic narratives: missing beautiful opportunities for better returns.

All the red ticks demonstrate the history in the last 10 years that the same move took place. The tipping point betweenpessimism vs optimismcan change quickly, leaving many investors behind.

VALUE vs GROWTH

It is noted that the momentum of Growth assets (mostly in the technology sector) remained high performance in relation to assets of Valor since approximately 2008. White Bands: moment of best performance in Value assets.
Blue Stripes: moment of best performance in Growth assets.

Are we facing a new period in which Value assets will maintain better yields? On this, I leave each reader to reason about the political and economic perspectives that we are experiencing.

ECONOMIC COMPOSITION vs S&P 500

Decades have passed, but macro economic cycles continue from time to time. Every time we are faced with a crisis, whether economic or political, the cycle has been well defined by Orange Line, also following a correction in the financial markets by the Black Line.

In view of the above, the current moment keeps us cautious about the real future of the recessionary crisis ahead, because according to the historical agreement shown, we are still in an upside macrocycle.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s