Charts that make you go……hmmm!

February 17, 2021

3:06 pm

Years of zero interest rates, central bank money printing and government bail outs appear to have created a stock market defined by speculative excesses. It is often said that ‘a picture is worth a thousand words’ and therefore we have put together a series of charts demonstrating just how ebullient investors have become. You will have to draw your own conclusions whether you think this is likely to end well or badly but we know what we think! 

Chart 1. To the moon…
As 2020 amply demonstrated, the future is highly uncertain, and it will inevitably be shaped by unforeseen events. As investors, we simply have to accept the fundamental truth that not everything is forecastable, and some events are beyond our control. Nevertheless, in spite of this uncertainty, there are always things that we can do to improve the probability that we will deliver successful outcomes for our investors.
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Source:Bloomberg 12 February 2021. Past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested.

Charts 2, 3 and 4. Retail speculation
Speculation from retail investors, particularly in penny stocks, has seen US equity volumes approach the peak seen during the pandemic crash. At the same time, volumes in option markets have also soared.
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Source: Bloomberg 12 February 2021.

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Source: Bloomberg 12 February 2021.

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Source: Bloomberg 12 February 2021.

Chart 5. Tesla
We are always looking for repeating patterns in our investments, building on our existing knowledge, recognising what works, aiming to repeat success and, importantly, learning from our mistakes. We believe that fishing in these same buckets over and over again, will allow us to continue to slowly lean the statistics in the right direction.
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Source: Bloomberg 12 February 2021. Past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested.

Chart 6. What Are the Benefits of Making a Profit?
Non-profitable tech stocks have widened their outperformance relative to FANNG.
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Source: Bloomberg 12 February 2021. Past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested.

Chart 7. Bitcoin soars with PayPal and Tesla moves
Another favourite of retail investors has been Bitcoin. Back in 2017 euphoria around the cryptocurrency sent its value vs the US dollar to $15k. However, that quickly fell back to ~$3k and it felt like it was forgotten. That was until in October 2020 when PayPal launched a new service enabling users to buy, hold and sell cryptocurrencies. This caused a huge rally in the currency. And in early February when Tesla announce it had bought $1.5bn in bitcoin, the currency moved to $47k.
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Source: Bloomberg 12 February 2021. Past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested.

Chart 8. Pot stocks
Cannabis stocks had moved after President Joe Biden’s administration promised decriminalisation, and then again on a retail inspired push. But this trade has quickly reversed.
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Source: Bloomberg 12 February 2021. Past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested.

Chart 9. Do fundamentals even matter?
In April 2020, the Fed expanded its efforts to save the world by adding junk bonds to the list of assets it could buy.
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Source: Bloomberg 12 February 2021. Past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested.

 
Chart 10. US IPOS, blank-check companies outperforming the broader market
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Source: Bloomberg 12 February 2021. Past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested.

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