Sometimes you have to go into the engine room to see where and how fast the ocean liner is going. It is not enough to know what the Fed is doing in the captain’s tower. Fed stimulus is obviously a big macro driver, but there are also other factors.
Today’s stock market may remind you of the 2017 ICO meltup or the Dot Com bubble.
Maybe it is now having a healthy correction?
During 2020 with some tech stocks trading at a PE over 1,000, it did not take a genius to warn about bubbles.
You have to delve below the daily market gyrations to see some of the underlying Fintech driven market structure changes driving the market:
1. Most of the volume is automated trading from ETF and other passive indexing funds. So it takes very little volume to move the market.
2. There is some speculative buying from retail investors lured in by free trading apps like Robinhood and using stimulus checks.
3. Investment banks who want the market to go up amplify the retail investor’s moves – but probably also have short hedges in place. The revelations that Softbank was a big buyer in the public equity markets seems to confirm this part of the thesis.
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