These Crazy Markets

Jan. 04, 2019 6:34 PM ET2 Comments
Larry Hall profile picture
Larry Hall's Blog
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Long Only, Value, Growth, Special Situations

Contributor Since 2018

I am a writer with diverse interests from creative writing to physics to tennis and music. Another interest is markets/investing. I manage my own portfolio and enjoy it.

I believe in research as a critical component of any investing decision. I do comprehensive research on any stock that I am considering purchasing. I also keep current with names that I own. This is also because I find company dynamics and adjustments to market conditions a very interesting interplay. I suppose that my style is 'growth' according to the standard definitions; I am really looking for quality companies that I can own for a long time. That's really value investing, which brings me to my final Bio thought - categories like 'value' and 'growth' yield to 'quality' if we invest soundly.

Summary

  • Volatility Is in Vogue.
  • It's Not Just Algos.
  • Where Do We Go From Here?

Volatility has seized the markets and is shaking them, hard. There is no end in sight. Many people associate volatility with correction action, but it may be a regular feature of the landscape from here.

Many commentators point to algorithm-driven trading machines as whipsawing the markets. While such mechanisms promote wider swings, the impetus for the moves is likely a result of multiple factors, including reactions to U.S. Federal Reserve moves, news on the 'trade war' and company earnings, and anxiety about political instability in the American capital. A volatile environment makes for volatile markets.

Now the Fed has turned somewhat dovish, though the bullish aspirants doing a 'happy feet' dance might prove premature. Nothing that Jerome Powell might do - despite his obvious power - erases or alters the course of vast macro economic processes such as a slowdown in China or problems in the EuroZone. Yet, over time a Fed that throttles back on interest rates or quantitative tightening might see its actions indirectly affect those realities. In the short run, that is unlikely.

What is clear is that in the Information Age and the Internet Age in which people are relentlessly monitoring the markets and trading at ridiculously high levels, several kinetic waves of market and economic news can overwhelm the markets, excite the algos and cause great swings. This makes for a manic-depressive stock market and jumpy investors and traders that never rest. 

And all that, in my view, is a recipe for more volatility. The drama has probably just begun.

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