Market Turbulence

Buy the rumor, sell the news?

Quite possibly.

For a few weeks, there’s been a significant rally in US equities and many international markets. One ostensible cause was the imminence of a vaccine for Covid. Now the vaccine is here and the market is going down. Why?

An old truism is buy the rumor, sell the news.

News rarely lives up to the hype. A successful vaccine probably isn’t going to be the light-switch for Covid people are making it out to be. Problems are arising, and while those problems look manageable, or at least expected, they’re nontrivial. So the rally, which may have been supported by vaccine-optimism, is now retreating a bit in the face of vaccine-reality.

Rallies objectively happen. Motivations are speculation. We don’t know if the rally was vaccine driven. There are millions of people in the US equity market, so assuming they’ve all got the same motivation is a bit unreasonable. That some people bought equities due to vaccine-optimism is near certain. That the rally was driven primarily by vaccine-optimism is much more debatable, and that vaccine-optimism looks the same to all people is wrong as certainly as that it drove some action at all.

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