Nothing, nothing, NOTHING changes sentiment like price.
How do we know this?
Consider all the of the conversations currently around the possibility that the Fed and Treasury, in the space of 6 weeks, have KO’d the recession. V-shaped recovery baby.
I GUARANTEE you we would not be having these conversations if the S&P 500 was still at 2,200.
But with the S&P just 13% shy of it’s all-time high (and the NDX positive for the year) the case seems a lot more plausible.
And here, too, reflexivity comes into play.
Here is Soros on the subject:
“Every bubble has two components: an underlying trend that prevails in reality and a misconception relating to that trend. When a positive feedback develops between the trend and the misconception, a boom-bust process is set in motion. The process is liable to be tested by negative feedback along the way, and if it is strong enough to survive these tests, both the trend and the misconception will be reinforced.”
It scarcely matters whether the recession has been killed off or not. The #stockmarket can make new highs so long as feedback loop drivers maintain the divergence of price from reality.
This is why I trade price, and not my beliefs about reality.