The Cycle of Market Emojis: explained
Denial: its not a river in Egypt :-)
How do I feel about the markets right now? That’s a question investors ask themselves all the time. Wall Street has created many ways to try to gauge this. One of my favorites is the simplest: put an emoji on it!
The above chart was originally created by Munder Capital back in the late 1990’s. About a decade ago, I created this emoji-driven version of it. The psychological component of investing is not only critical, but may be as important as any other factor in setting portfolio strategy. Let’s face it: collectively, all of us are “the market”. For this reason, I’m always looking out for even the smallest piece of information that might help determine what significant, long-term changes may occur.
The markets have and will always be volatile. The implicit assumption of investing as a concept is that investors are willing to assume risk in exchange for potential reward.
This chart was originally created by Munder Capital back in the late 1990’s. About a decade after that, I created this emoji-driven version of it. The psychological component of investing is not only critical, but may be as important as any other factor in setting portfolio strategy.
Let’s face it: collectively, all of us are “the market”. For this reason, I’m always looking out for even the smallest piece of information that might help determine what significant, long-term changes may occur.
The markets have and will always be volatile. The implicit assumption of investing as a concept is that investors are willing to assume risk in exchange for potential reward.
As part of the free subscription to ETFYourself.com, we update this Cycle of Market Emojis whenever we believe, from a combination of science, art and experience, that is has changed. There are parts of the market cycle that can see the emotions/emojis change rapidly, and even back and forth. And, there are other periods in which this picture is unchanged, as it was from June of 2022 through September of 2023.
What happened during that period to keep the Cycle of Market Emojis stuck on “Denial?” Risk was rising according to many of our indicators, but stock market activity, particularly the “buy the dips” mantra for the so-called “Magnificent 7” stocks kept alive the strong element of bullishness, regardless of the fading economic and interest rate situation developing.
We’ll continue to track and update this. As I post this on 9/26/2023, with the S&P 500 at 4,272, the “Denial” stage may finally be coming to a close. Stay tuned!