![]() ![]() In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. Such content is therefore provided as no more than information. Such access and use are at all times subject to (i) The Terms of Use (ii) Full Disclaimer (iii) The Risk Warning (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. This content is not intended to and does not change or expand on the execution-only service. The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. The orange line is the current drawdown and something we will be monitoring for some time as it shapes investor psychology. This is still the fastest recovery ever in history from such a large drawdown that reached 27.7% at the bottom and a recovery that took many quant strategies and tactical asset allocation strategies by surprise. The blue line is the recovery after the Covid-19 pandemic started the historic sell-off last year. The chart below shows the 15 drawdowns and their recovery profile. ![]() It is only really fun when returns come fast and easy. Therefore our thesis is that if this becomes a lengthy drawdown in technology stocks due to higher inflation and interest rates, then it will alter the investor psychology of growth investing and many will become impatient and shift strategies or maybe even leave the market. This means that a lot of the new marginal buyer of technology stocks have never seen a drawdown and not a drawdown of proper length. Many arrived during the rebound phase last year when many people were forced into lockdowns. Source: Bloomberg and Saxo Groupīut the last couple of years bull market, improving labour market dynamics, a larger focus than ever by media on technology stocks, the rise of crypto and Tesla, have pulled many young people and women into the game of equity investing. There are also many mentioning of young people and women nor participating. Even has late into the current bull market as 20 you can find many articles on where the retail investor is in equity markets, and whether they will ever come back. The drawdown after the financial crisis in 2008 and the subsequent unemployment rate was also detriment for retail investor participation. Investors are impatient people despite many argue they invest for the long term. This was one of the main reasons retail investors left the equity market after the dot-com bubble burst. What is important to investor psychology is the drawdown length. ![]() The median and mean drawdown length of these 15 drawdowns are 121 and 157 trading days respectively, so the current drawdown could extend for 6-9 months if this is an average drawdown. ![]() The current drawdown is the 15 th largest since 1 January 2003, so while it has felt dramatic to many investors it is still a benign correction. Every drawdown has its unique cause and comparisons should be made with great caution, but when you face a drawdown of meaningful size you need to get your statistical prior right. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |