Dull markets can be an occupational hazard for traders and investors alike.
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If you’ve been through one dull market, you feel like you’ve been through them all. It’s a consistency one might find cheering when needing a fast-food place to eat or place to stay while on the road, yet does little for traders who wind-up sinking into half-mad grooves as the hours, days, and weeks of market monotony gnaw away at their hearts and minds.
From the trading dens of Shanghai to London to New York the scene is intensely similar. Already at nine o’clock in the morning, traders are bored with their captivity. There’s nothing to talk about except reiterating the petty levels of the VIX index, the S&P 500 multiples debate, the attempt to sift the mind of a central-bank bureaucrat, the various iniquities of politicians and governments, along with all the silly little orthodoxies which parade through a mind wrought by bouts of prolonged idling.
One o’clock in the afternoon, the clock’s hands crawl round with excruciating slowness. Traders are too bored even to talk now. The only sound is of reverberating yawns as they slowly depart from the fray of incessant arguing and hazy speculation about a market beyond their collective wisdom; only to watch stocks, bonds, gold, and oil wobble aimlessly as they have done so since the August 5 U.S. jobs report.
History tells us that market doldrums are an integral part of market life and that these episodes can persist much longer than anyone can predict.
Do market funks tell us anything? No! And, it’s potentially hazardous to use what you think the market is revealing to you as any sort of ultimate truth. Just think back to the economic stability of the pre-Lehman Brothers crisis; the market was outwardly “saying” that lending 100% of a home’s value to sub-prime borrowers was just sound business, that the credit sovereign rating of Greece and Spain wasn’t terribly different than Germany’s.
Generally speaking, over-reading or over-thinking what the market might be “saying” defiles the scenery, like beer cans and sandwich bags on the seashore; there is so much clamoring for investors’ attention and basing an investment thesis upon scraps of isolated information is foolhardy.
Presently the stock and bond markets slink along. And similar to a waiter entering a formal dining room, the market glides around its guests with a confidence and solemnity reserved for a prince; the litany of anxieties and dirty secrets left back behind the doors of the ramshackle kitchen.
Extended stock valuations, low productivity, contorted yield curve, anemic global growth, negative interest rates - eventually there will be a crisis; perhaps a calamity of such magnitude forcing governments to make odious choices - forsaking market health in favor of fiscal sustainability. However, until it does, the impulse to stave off, to walk the broad road, to defer, will remain as will market experts with phony rationalizations as to how this will all end up.