Tech Bubble? Tech Babble? Tech Wobble?

Tech Bubble?

As I told CNBC’s Geoff Cutmore* on 1st September, I’d started worrying in August that maybe the liquidity stimulus was starting to get a bit thin…. across asset classes – but then this occurred – *https://www.cnbc.com/video/2020/09/01/an-expensive-market-is-telling-us-to-be-overweight-cash-mbmg.html 

How could that happen if liquidity was starting to get a bit thin?

Tech Babble?

Here’s how-

Avg SPDR S&P 500 ETF Daily Volume last 20 Days      48,984,180

Avg SPDR S&P 500 ETF Daily Volume last 65 Days      76,372,602

                                                                                       Source: NASDAQ

I asked the question ‘What happens when volume returns and more liquidity is needed?’

I didn’t know the answer but…….I did know to beware the September effect!* Especially if you hold Tesla, FANGs, NASDAQ or liquidity sensitive Beta

*Analysis of market data – such as the DJIA – shows that September is the only calendar month with a negative return over the last 100 years. 

October’s 100-year dataset is positive despite being the month of the 1907 panic, Black Tuesday, Thursday and Monday in 1929 and Black Monday in 1987.

The month of September has seen as much market turmoil as October.

It was the month when the original Black Friday occurred in 1869, and two substantial single-day dips occurred in the DJIA in 2001 after 9/11 and in 2008 as the GFC took hold.

The September effect is not limited to US stocks but is associated with markets worldwide.

Some analysts consider that the negative effect on markets is attributable to seasonal behavioral bias but another reason could be that most mutual funds cash in their holdings to harvest tax losses whilst there’s also an argument that it could reflect the conflict when summer highs driven by low volume are confronted by increasing daily trading volumes following the return of market participants after the summer.

                                                                  Source: Investopedia.com, MBMG Investment Advisory

Tech Wobble?

How’s September playing out so far?

So far, it looks like the September effect is happening again…but the longer that this goes on, the more pressure will be on policymakers to try to respond to this. For 2020, the September effect (or not) may well rest on how reactive and how successful they are.

Disclaimers:

1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation.

2. Please ensure you understand the nature of the products, return conditions and risks before making any investment decision.

3. An investment is not a deposit, it carries investment risk. Investors are encouraged to make an investment only when investing in such an asset corresponds with their own objectives and only after they have acknowledge all risks and have been informed that the return may be more or less than the initial sum.