“This time is the right one! Says the uninspired investor since the beginning of the year. It must be said that he often tried to recover, but it was the setback that he succeeded in best. Since the beginning of the year, the stock markets have fallen by almost -8%. We can understand that the investor does not want to miss out TRUE rebound, which will allow him to save the day.
Specifically, it must be recognized that the current retracement appears to be a serious candidate for a sustainable retracement position. In fact, since the beginning of October, the value of stock markets has increased by about 20%. Admittedly, the markets did exactly the same thing to us over the summer, appreciating the same amount and dipping to their lowest point at the start of the school year. But wait, if Heraclitus is right then” Any downturn in the markets carries with it a rebound “.
from any act. So let’s give the sustained reversion the benefit of the doubt. Maybe he has better intentions than the previous throwback? Perhaps he has other, more serious arguments to defend?
The genesis of a rebound
When the market recovers in such a way, so violently, in such a short time, it is because the investor is necessarily shaken in his certainty, and then spurred on by the momentum of winning. Poet. Sometimes this is indeed the case. But most of the time it’s less screaming. Throwbacks are not made on hard evidence, but only on a set of clues.
And the constant bounce seems to be exactly that kind, spurred on by a raft of clues rather than shocking news. Not enough for a police inspector or investigating judge, but enough for an investor. Generally speaking, finance is content with little to discount much.
Therefore, no particular news prompted a stock rally. Just a background spread of less bad news than expected. There is no need to classify regression patterns according to their informational load. Stack suffices rather than sort.
” We will be allowed to accumulate without a small nuance, but its quantitative effect leaves no room for doubt Herve Fisher.
Outside the system, the economist or market finance strategist recites his lesson:
“US inflation excluding energy slowed against all forecasts… Activity figures look less worrisome than those forecasted by leading indicators… Consumption appears to be resisting a collapse in purchasing power… Corporate earnings are not weakening, quite in contrast… Prices Energy is running low… Interest rates now seem to be going off the wrong foot…”.
In short, since all the bad news is already behind us, it’s time to think about the good news that is sure to come one day. And thus the stock boom was born. Admittedly, sometimes a bundle of clues is not enough. Because the investor is not in a good mood, because his coffee was cold… Piss – coolmaking it unavailable for any constructive discussion.
But all is not lost. The highly skeptical investor can still be persuaded. All you have to do is pull out the trump card, the one that will finally stimulate the choice of rebound, like another carrot you give to Buridan’s ass so that he can make up his mind.
The original will convince the most skeptical
“Markets go up because they fell so much…”. impervious.
In fact whoever uses this argument will put the figures:
“The risk premium was so high…the investor was so incredibly risk averse…”, and even more bizarre “the market price was so low compared to the theoretical price calculated from the discounted value of the company’s future earnings that analysts had projected…”
It must be said that this kind of argument has a theory to it. This is called Logical differences in risk premiums. When things seem to be going a little better in the real world, the investor is justified in reevaluating the virtual world of finance.
“If I’m less afraid of losing my job, I’m less afraid of losing in the stock market.”
There is also an equation dedicated to defining the thing:
“Risk premiums vary negatively with the economic cycle…”
Translation: The consumer who improves is the investor who becomes less demanding. And in a way, we’ll say the recovery in stocks is reasonable. But is it really reasonable? no.
Logical but unreasonable recovery
Rational and reasonable are two names that are often contrasted, such as the risk premium and economic cycle described above. When you have one moving, you often have the next one. But not always. Thus, I can be rational, but it doesn’t have to be rational.
I’m rational if for the same price I’d choose the largest package of beer…but is that really reasonable?
I’m rational if I believe in Santa Claus because I always have presents on December 25th…but is that really reasonable?
I’m rational if I believe in aliens from then on There is a prohibition that they arise on Earth... But is this reasonable?
I’m rational if I believe in the Loch Ness Monster because bathing in the lake is not recommended…but is that really reasonable?
Finally, I’m rational if I believe in a market rebound since a bunch of indicators…but is +20% really reasonable?
“They go faster and faster, to cover less and less distance.” Jacques Prevert