MICHEL PIREU: If October felt like a roller-coaster ride, don't forget the broader context
When you look at the stock market now — at relatively high valuation with all the good news built into it — the question may be: what’s driving markets into the future?
October might have left some investors feeling a little like Worthington Fowler’s speculator who, “one day is lifted to dizzy heights, the next, plunged into black depths. [Who] is hurried through dark labyrinths where a single misstep is destruction … where he tastes joys brief as a dream, and in an hour is abased to the earth where he drinks the full cup of humiliation and want, blacksmiths' sparks flickering before his eyes”. In which case the problem may be, as Barry Ritholtz tells Bloomberg, that they’re probably looking at the day-to-day from the wrong angle. “We have a tendency to lose the ability to put any given week or month into the broader context,” says Ritholtz. “As an example, last year was a tremendous year with markets up over 20%, with little volatility. We never know when that’s going to end, but typically we do see some regression to the mean …. As Hyman Minsky told us way back when, markets go through regular boom-and-bust cycles and stability tends to breed ins...
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