Last week the markets were volatile, experiencing the biggest drawdown in nearly 6 months on Tuesday yet finishing the week slightly positive overall. The respite was brief however. Selling continued into this week, highlighted (lowlighted?) by Thursday’s epic turnaround when, following market darling Nvidia’s strong earnings report on Wednesday evening, the market roared as it opened and then collapsed – the S&P 500 rising almost 2% before ending the day down 1.5%. Excitement over AI gave way to fears of excessive capital spending. Rate cut expectations declined in the face of various Fed Governor comments. Sentiment, formerly extremely positive and overly optimistic, had changed…suddenly fears of a bubble and investor pessimism had asserted control…

I was tempted to begin today with the truism ‘The more things change…etc.’ Fairly certain that I had used it previously, however, I resisted. I try not to repeat myself. Still, several aspects of market activity and analysis keep reappearing and repeating – in particular, the endless debate on valuation and the existence – or not – of a bubble, as well as the frenetic investing activity jerking the market averages around. Today, (11/7), for example, the market averages opened down and continued so, the decline reaching more than 1% at its lowest, the Nasdaq down almost 2%. Then suddenly an unexpected reversal, the day ending with several of the averages in positive territory and the Nasdaq’s decline just 0.2%. If you are a trader, you love the volatility. If you are an investor, you need to look through it, focus on the long-term horizon, and control your emotions…

The market’s activity since last we met in this space has only heightened emotions amongst investors. Excitement about artificial intelligence has led investors to add to investments in large tech companies, often disregarding traditional valuation metrics. The rising market has also encouraged those who ply the meme stock waters, generating the necessary headlines and hyperbolic moves in the targeted securities. Though quarterly earnings reports have mostly been strong again, many market participants are increasingly focused on narratives and momentum rather than earnings, valuations, and the financial health of companies…

Is there more turmoil in the world than usual…or are we just better, and more rapidly, informed about everything, everywhere? The planet doesn’t give off the feeling of being a happy place; the mood in this country is further evidence of that. Conflicts, both violent ones and the merely political, continue to pop up all over the globe. This week, we added a domestic political assassination to the mix. And yet, through it all, the markets have maintained a positive aspect and in the last couple of weeks have settled out repeatedly at new, all-time record highs. It frankly feels a little unreal to me though I feel like an outlier having this viewpoint…

Not that long ago I was struck by a subtle change that a large investment management firm made in their advertising message to potential clients, highlighting a concern that is frequently overlooked - the risk of being too conservative. It is an error that is easily, and unfortunately, often made by investors….

The recent activity in the financial markets all seems so familiar - the market making new highs, sentiment  very bullish, optimistic predictions that the market will finish the year even higher than it is today are widespread. I apologize if this will seem somewhat repetitive - it is just that I’ve seen this movie recently, was just on this crowded boat. After all the gains of the past 30 months, I cannot get myself comfortable assuming that all projections that it will continue will actually come to pass…