2024-08-31 05:29:51
“Due to the speed and astronomical volume, corrections of 20% and more that previously took weeks, months or even years to recover, now take only days to weeks before another bull cycle begins again. The number of trades now processed by algorithms? In my opinion, this explains why we are no longer experiencing the major corrections that were announced, but rather multiple corrections that are very short compared to the past. » – Mr. Dion
The volatility observed recently may indeed give such an impression. However, we must be cautious before jumping to conclusions, as it is difficult to pinpoint the exact reasons that explain market volatility.
The stock market’s most recent big drop was the result of very specific events, namely, the pandemic and rising interest rates.
More recently, more notable downturns have been concentrated in specific industries or segments. The early August decline, which primarily affected the largest stocks in the technology sector, was more like a movement or rotation of funds than an exit by investors.
Economic and political uncertainty has undoubtedly also heightened investor nervousness.
But Voiku Valentiel, a former market maker at National Bank Financial Corp. and president of Laval investment firm Cavallo Group, said the market is indeed reacting faster than before.
Readers’ Observations and Conclusions press Therefore, the stock trading expert considers it relevant.
It’s clear that everything is happening faster, in both directions. Machines are discounting news and events as they happen, almost at a click.
Voicu Valentir, President of Cavaliro Group
But according to the expert, there is more. Mr. Valentiel said an important factor to grasp in the current situation is the role and influence of the US Federal Reserve (Fed).
“It’s the Fed that sets the tone for the stock market,” he insisted.
“Once the Fed speaks, the market adjusts quickly. Today, central banks seem to intervene more efficiently and quickly to avoid excessive cycles and recessions in the market.”
“So if the market follows the central bank, we don’t observe big long-term declines, which is normal. Because once the Fed makes a comment, the market adjusts immediately. The speed of execution changes,” he explained.
He points out that in another era, people spent time reading for information, great thinkers expressed their opinions, and so on.
“Today, everything is planned. Large investors, such as hedge funds [fonds de couverture] Once the news comes out, the banks know what they have to do. The market is heavily influenced by the Fed today. »
The growing popularity of exchange-traded funds (ETFs) is another factor that cannot be ignored when trying to explain market behavior. ETFs have undoubtedly had a significant impact on today’s trading volumes.
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