What’s going to happen next, anon? (NOTW#86)
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Markets continued to grow optimistic about a short-term resolution of the conflict in Iran. Of course, many are claiming that they know what will happen next (both bears and bulls), but the reality is nobody has a clue (hard truth, I know). I also share some news on Nintendo (surprise surprise, the thesis is playing out again).
Without further ado, let’s get on with it.
Articles of the week
I published one article this week: ‘From headwinds…to tailwinds.’
Judges Scientific reported definitive 2025 earnings, and while the trading environment is not improving much, it now seems like the risk-reward skew is very favorable. I explain why in the article. Just so you can gauge where sentiment is, I read a sell-side report in which they had a PT of 60 pounds for Judges but outright admitted they were not including any Geotek Coring contract in 2027 and beyond. Read that again: they had a PT of 60 pounds (40% above today’s price) while ignoring a multi-million dollar contract that management expects to happen 3 out of every 4 years. Weird, but I guess they’ll have to eventually raise their estimates significantly.
Without further ado, let’s see what the markets did this week.
Market Overview
It was a short week in financial markets (due to Good Friday), but it was not a boring one (it never is). Both the S&P 500 and the Nasdaq rebounded as soon as Trump and Iran (we don’t know what Iran) hinted at negotiations and a wind-down of the conflict:
Trump addressed the nation on Wednesday in a discourse that honestly seemed like a nothing-burger (i.e., there was not much more new info). I know that we are constantly being bombarded with a lot of information and that a lot of people are making forecasts, but I sincerely have no clue what will happen over the coming weeks/months. Everytime something like this happens I try to go back to prior geopolitical events and remember what I thought back then and what ended up happening. For example, when Russia invaded Ukraine, oil and gas prices rose more than they have risen currently, and even though this was seen as catastrophic, the world eventually made it through. We shouldn’t ignore geopolitical events, but we should also try to avoid thinking what the doomers think: that every geopolitical event is the end of the world.
We are currently in a long weekend and we should already know that Trump likes to shake things up while markets are closed, but I have no clue if this weekend’s announcement will be boots on the ground or a ceasefire. Those people who claim to know what will happen are being incredibly optimistic with their forecasting ability, but eventually some will be right (I guess).
I think that understanding the market structure is very useful to contextualize short-term market moves. If I were to ask you who makes most of the daily trades in the stock market, what would you say? I’d imagine most people think that the “smart money” moves markets (smart money understood as institutions with the big bucks), but the reality is strikingly different. Around 50-60% of daily trades are made by HFT (High Frequency Traders) and market makers, whereas around 20-30% of the trades are made by individual investors. This leaves around 10-20% of the trades to the “smart money.” So, it’s highly likely that stock prices over the short term move for reasons very different to fundamentals. Not claiming I am discovering anything new here, but it’s always a good idea to have this in mind when looking at stock prices and trying to explain what’s moving them. In short, not all stock price moves are signal, most, in fact, are noise. Understanding which is which is pretty much impossible, so independent thinking is a must.
The best thing an investor can do is to acknowledge that there are many things that they don’t know and/or control, and work with what they do know and/or control. Could I spend hours thinking about what the US’ strategy in Iran is? For sure, but I don’t know if that would be the best investment of my time.
The industry map was pretty much the opposite of what it has been the last couple of weeks: most of it green with the exception of the energy industry:
The fear and greed index improved but remained in extreme fear territory:
