The Rise of Thematic Investing
The red mist descends again. It’s a second wave of selling for a second wave of outbreak. It’s the furthest drop since twelve weeks ago when armies of bored speculators took control of markets. Here are the need-to-knows!
It doesn’t matter that coronavirus is all-but gone in most parts of the world. If stateside consumers are bed-ridden, the world is without a global trading partner. Florida, Texas, and California are experiencing rising cases again, but touch wood, another wave won’t be as bad as the first.
We know what we’re dealing with, and our hospitals have had some practice treating the virus. It would be surprising if markets dropped as deeply and as violently as they did in March. However, it would also be surprising if the correction ended here.
US Secretary of the Treasury, Steve Mnunchin, is adamant we don’t shut down the economy again. You can bet that’s a direction from above. We need to be prepared for how markets will behave if forced to process business reopenings while people die in the background. We need a grasp on the value of human life from the perspective of an investor—specifically, a retail investor (non-professional investor).
Sports-betters turned stock-betters have been the driving the recent rally. It’s a day trading crowd, overzealous to say the least, showing almost no care for ‘investing rules’ and using its power in numbers to soar bankrupt stocks like Hertz, Whiting Petroleum, and Carnival. It’s worked out for them so far, but all good things must come to an end.
We don’t know if retail plans to stick around after this sell-off. If the majority of traders walk away, the sudden outflows could mean pain to come for the rest of us. The biggest risk is that institutional investors like hedge fund managers are given clients’ orders to join in the selling. It’s a hard snowball to stop when it has momentum. Time to risk-off?
