Trading Salience in a Hyperconnected Marketplace (Part 2)

Blockbuster’s back!
We all collectively decided to go to the movies.
A bad year to try for your 2/20.

Theme and the Trend

  • The pandemic is out of control — This would happen largely when a new lockdown or some boogeyman news (e.g. the new COVID variant discovered in late December 2020) happened. This narrative would largely bolster tech (specifically stay-at-home) stocks at the expense of small caps (specifically travel and recreation), with a high chance of spiking volatility as well.
  • Vaccine optimism — This was most dramatically demonstrated by the blistering rally in mid-November of IWM in response to the vaccine news by Pfizer. This narrative dictated lower volatility and rallying of small cap stocks, largely at the expense of stay-at-home (and tech in general).

Hyper-connectivity and the Reflexivity

  1. Greed
  2. Fear — Fear of losing money, or more commonly, fear of missing out.

Part 3

  • Investing in a hyper-connected world tends to follow the power of the narrative, especially with the advent of low-information investing and trading.
  • The impulses and groupthink of investors in reaction to news and catalysts tends to lead to reflexivity, which is a major component of stock boom-bust cycles.
  • In a hyper-connected world, trends (time periods dictated by themes) tend to be more dominant and also shift quicker.
  • Trends tend to coincide with simple ideas appealing at some level to fear (fear of loss, FOMO) and greed.




Love podcasts or audiobooks? Learn on the go with our new app.

Recommended from Medium

Origin StHeLPI Trust

Does my ex need to be notified that I am filing bankruptcy?

How to make your kids millionaire’s

Money Basics, Personal Finance 101: There’s Actually No Such Thing

How Much Money Do You Need to Never Work Again?

Why GameStop Stock Spiked Over 800% In The Past Week

The Surefire Way to Make a 5-Figure-Income on Medium Every Month

Global Investment — An Unexplored Domain for Indians

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Nope, it's Lily

Nope, it's Lily

More from Medium

Partnering with CURB

Bond Market Wrestles With Risk Inflation Becomes Unmoored

Busted: 3 Myths about the use of Blockchain in Supply Chain Management

Introducing Makers Market