The Market Unfazed and the New Investor
What happened to investing? As a young 22 year old, my scope of perspective is limited, but there was once a time in my life, and especially in the older generations, when the markets cracked under uncertainty. Major leaders meeting would halt the markets in their tracks, paralyzed by the uncertainty, and it would take days to take in new information. Today, the idea of the USA and China going to economic war leaves the markets unfazed and investors unbothered. What has happened?
I am not saying the markets are invincible to outside catalysts such as the China USA relationship, but it seems as if investors are calling the bluff. In the midst of this trade war, the $SPY has reached all time highs yesterday at $687.39. There is a Trump related argument that we have seen him play this game before or that the overwhelming bullish market is suppressing the sentiment of these tariffs, but I think that is simplifying the phenomenon and we can point to other instances of this new age market.
The Japanese yen carry in 2024 was a week long ordeal that was swallowed up by immediate reversals in the market that swept the 10 percent downside that occurred on the day. If this were 2010, I’d argue this would be international news for months as the markets struggle to recover. There would be a flood of calls to brokers in New York followed by conscious restraint before entering back into the market. There are two plausible explanations for this. Investors are smarter now, they saw a buying opportunity from the dip. Perhaps they simply did not care. I will touch on this later. What is the most unnerving is the underlying issue that caused the yen carry mini flash has yet to be resolved. We glossed over this simply because the markets did.
I think the new investor does not care to an extent. This is highlighted in younger investors and those that follow the meme trends from Reddit. Rather than companies producing value driving price higher this group has introduced mob mentality into the stock market. We saw this most recently with $BYND and $DNUT. What’s worse than you not making money is a friend making money. I believe this mentality has bled into the greater markets as investors seem to be unfazed by news.
Lastly, stocks are trading at record high P/E ratios. I can understand this sentiment to an extent with the emergence of AI, but the MAG 7 are spending more than an arm and a leg to capture the value of AI with nothing to show for it. Despite the decreasing ROI they seem to be immovable objects toward growth. Looking at quantum, it gets worse, these companies have billion dollar valuations, billion dollar spending, and revenue comparable to that of a lemonade stand and they are still growing year over year in market value. There is a new precedent in the market that makes companies like this palatable to investors.
I believe the accessibility to information, which is faster than ever before, plays a role in this phenomenon. Investors can view news at their fingertips, and trading is no longer delayed by phone calls or middlemen. As a final note, the news is also expressing the same sentiment. Multiple articles a day highlighting the idea of a bubble yet justifying it because “profits.” To some extent I am in the same boat and guilty of the same crime. The new age investor has everything at its fingertips which seems to mean the market does too, more than ever.
