Rising bond yields in several markets across the world, a sharp fall after hitting an all-time high in South Korean equity markets, and continuing selling in precious metals left global markets in a state of palpable unease.
While the mood among seasoned market participants who have seen multiple cycles is not positive, those in their first cycle and the tech-driven generation of investors don’t seem to be worried at all. Clearly, the jury on this market is visibly divided between investors adopting a top-down approach and the bottom-up stock picker generation. Young investors think that caution is not needed as long as they can keep finding growing stocks. Clearly, their investing is completely gamified by Trading Apps, Artificial Intelligence tools, 5-minute research reports, and technical analysis.
Experienced investors aren’t willing to take risks overlooking valuation excesses, mispricing of growth, and outrageous scarcity premiums. Clearly, this is a polarised market divided right at the middle between two divergent schools of investing. This is also not new at all. Every market boom unfailingly brought out this divergence between cautious investors chastened by past experience and newbies driven by newfound success.
But, then macros turn very fast and the markets get shaken badly, different schools of investing are forced to converge into the same zone of investing. That zone enforces caution, discipline, and skepticism on every investor. While investors will always be looking to find winning opportunities in the market, their approach to investing will be sobering and studious.
The global bond yields of recent days, bubble valuations in areas like AI, sharp spikes, and sudden sell-offs are all indicators of what is in store. Clearly, this is a market that may be getting ready to put all investors, irrespective of their investing beliefs, in a tight spot. That zone of investing, where everybody respects the other view and accepts how fallible one can be, is now nearing.
