Last week saw the one year anniversary of the 2020 Covid Crash lows, accompanied by a lot of bad and misleading commentary.
A quick thread with observations & criticisms as to how so many missed the mark.
bloomberg.com/opinion/articl…
1/
A quick thread with observations & criticisms as to how so many missed the mark.
bloomberg.com/opinion/articl…
1/
12 months after March 23, 2020 lows the S&P 500 Index gained 75%.
Why is the time it takes the earth to complete one orbit around the sun relevant to stocks?
Add a month to 12 month time period, and the gains crash to ~15%.
75% vs 15%!! What a difference one month makes!
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Why is the time it takes the earth to complete one orbit around the sun relevant to stocks?
Add a month to 12 month time period, and the gains crash to ~15%.
75% vs 15%!! What a difference one month makes!
2/
Also worth noting: When the price of an asset falls 34%, it requires about a ~52% move higher to get back to breakeven.
Said differently, 2/3rds of that rally was simply getting back to where the markets where before the crash.
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Said differently, 2/3rds of that rally was simply getting back to where the markets where before the crash.
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Speaking of which:
Why is 20% fall designated a bear market? Who made that number up?
Has anyone tested the significance of 20% - beyond the simple fact we have 20 fingers and toes?
As far as I can tell, it appears to be a silly media cliché.
ritholtz.com/2020/03/ask-th…
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Why is 20% fall designated a bear market? Who made that number up?
Has anyone tested the significance of 20% - beyond the simple fact we have 20 fingers and toes?
As far as I can tell, it appears to be a silly media cliché.
ritholtz.com/2020/03/ask-th…
4/
New bull?
Ask yourself this very obvious question: Is anything about markets this simple or uncomplicated?
Do you really think you can identify the start of a new bull or bear by simply calculating 20% +/- ?
When has Mr. Market ever been that accommodating...?
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Ask yourself this very obvious question: Is anything about markets this simple or uncomplicated?
Do you really think you can identify the start of a new bull or bear by simply calculating 20% +/- ?
When has Mr. Market ever been that accommodating...?
5/
How that dumb 20% affects investors:
Many people assumed 2020 pandemic ended the bull market that began in 2013. So they sold into the crash
History teaches non-economic, non-market externalities temporarily disrupt bull markets, but don't end them.
ritholtz.com/2020/08/how-ex…
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Many people assumed 2020 pandemic ended the bull market that began in 2013. So they sold into the crash
History teaches non-economic, non-market externalities temporarily disrupt bull markets, but don't end them.
ritholtz.com/2020/08/how-ex…
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Examples include 9/11, JFK assassination, Pearl Harbor, etc.
Markets don't care mall that much about non-economic events
One can even make the case that the October 1987 crash did not end the secular bull market that began in 1982.
ritholtz.com/2018/08/impeac…
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Markets don't care mall that much about non-economic events
One can even make the case that the October 1987 crash did not end the secular bull market that began in 1982.
ritholtz.com/2018/08/impeac…
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The causes of that 1987 were more complex than you probably realize.
If you want to learn how it actually went down, I strongly recommend Tim Met'z book Black Monday.
amazon.com/exec/obidos/AS…
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If you want to learn how it actually went down, I strongly recommend Tim Met'z book Black Monday.
amazon.com/exec/obidos/AS…
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Back to the move off of the lows:
Why are Traders so attracted to rising stock prices?
They recognize price is a more reliable tell than the surrounding narratives. Momentum became a Fama-French factor for a reason.
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Why are Traders so attracted to rising stock prices?
They recognize price is a more reliable tell than the surrounding narratives. Momentum became a Fama-French factor for a reason.
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Something else of note: We should not assume all Buyers & Sellers are the same people.
At different points in the cycle, many different kinds of buyers and sellers emerge.
ritholtz.com/2021/03/buyers…
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At different points in the cycle, many different kinds of buyers and sellers emerge.
ritholtz.com/2021/03/buyers…
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Another peeve: Bull markets do not begin from bear market lows.
The 1982 -2000 bull market did not start in 1974 any more than the current bull began in March 2009.
Bear market lows as the start of a new bull is another silly myth...
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The 1982 -2000 bull market did not start in 1974 any more than the current bull began in March 2009.
Bear market lows as the start of a new bull is another silly myth...
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Understand the difference between Cyclical and Secular markets:
This is not the 2nd year of a new bull. Counter trend rallies and sell offs do not mark the end of longer-term secular trends. Look at longer-term forces underlying secular bull markets
ritholtz.com/2015/03/cyclic…
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This is not the 2nd year of a new bull. Counter trend rallies and sell offs do not mark the end of longer-term secular trends. Look at longer-term forces underlying secular bull markets
ritholtz.com/2015/03/cyclic…
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Lots of doubt about the move off of the lows, including a plethora of Top & Bubble callers.
Can all of us really spot a bubble in real time? I tend to doubt that. And yet, many people seem to be acting that way.
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Can all of us really spot a bubble in real time? I tend to doubt that. And yet, many people seem to be acting that way.
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That covers most of my frustration at the coverage & commentary of the market bottom's one year anniversary.
I channeled that annoyance into a column about conceptual errors people make about bull markets.
I hope investors find it useful!
ritholtz.com/2021/03/bbrg-b…
/ END
I channeled that annoyance into a column about conceptual errors people make about bull markets.
I hope investors find it useful!
ritholtz.com/2021/03/bbrg-b…
/ END
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