Market Fragility - Like a politician's ego on the campaign trail, markets have become vastly more fragile. The idea of market fragility, proposed by analysts, espouses that market movements in any direction have become much more severe and occur at a much more rapid pace than any time in history.
To put it in plain English, this is not your grandparent's stock market. Markets of yore are largely dead and gone, and this makes sense. It is estimated that over 50% of all notional volume in U.S. equity markets is powered by high-frequency trading (HFT). Basically, HFT is algorithms trading with other algorithms, moving money at blinding speeds our silly human minds couldn't comprehend. As a result, when market sentiment changes, the algos driving HFT trading push market movements in the direction of that sentiment with extreme brutality at much faster speeds than seen in the markets your parents, grandparents, and literally every single generation before saw.
We got a front row seat to this idea in March of last year. The S&P plummeted an absurd 32% in barely a month. Even in the depths of financial crisis, it took several months for the nation's primary index to drop 30%. Of course, there are exceptions, most notably the 20% single day fall back in 1987 on the infamous Black Monday.
HFT has been a game changer in markets of all kinds. Even in individual stock names we can see the severity of share price movements based on a single piece of news or a sudden change in sentiment. Long story short, the spikes are spikier and the troughs are troughier than ever. Isn't investing fun??
From White Hot to Just...Hot - In the time of wild markets and wilder prices that we're currently living in, housing has been anything but an exception to that theme. The pandemic essentially picked people up out of tiny NYC studio apartments and threw them into the white picket-fence laden countryside. This soaring demand for housing did exactly what it was supposed to do and pushed home prices to record levels. Now, that trend might finally be changing.
As seen in the chart below, courtesy of the WSJ, home prices are finally putting a slight dip in the exponentially upward trend. The Case-Shiller index measures the change in value of single-family home prices in the U.S. Just prior to September, the month the most recent data is from, buyers apparently started scoffing at the laughably high prices. August home prices had grown 19.8% from the same time in 2020 whereas September's slowed to a still-insane 19.5% annual jump.
So, this isn't great news if you happen to be a residential real estate agent. However, for those of us who want to live in homes someday, this is, as Borat would say, "very nice."