Key insights
- The author observes a disconnect between negative geopolitical events (Houthi attacks, escalating tensions, oil depletion concerns) and continued market recovery in April. This suggests a shift in market sentiment, potentially driven by factors beyond immediate news headlines. The author questions whether the market has already priced in the worst-case scenarios, despite Redditors' claims to the contrary, and highlights the difficulty in explaining recent market behavior based solely on news-driven reactions.
Over the past month or so, every time negative news came out such as the Houthis firing missiles toward Israel, markets fell, while they rose on positive news. However, right after that since the beginning of April, they bounced initially on "old news" about diplomacy and negotiations.
If that is not strange for you, say it was still considered a positive development despite being a rehash of previous information, events and rhetorics since then have worsened, to the level of bombing universities, Trump threatening to destroy an entire civilization, Iran cutting off direct communications & possibly retaliating beyond the region, and imminent oil depletion in certain countries (although OPEC countries may up their production).
Yet markets kept recovering. Price movements are often attributed to news or "surprises". Except when they suddenly stop explaining anything. Does this mean the worst is over already (despite many Redditors claiming the worst has not been priced in)? If so how or why would investors, after seeing the markets drop right after the Houthis fired missiles, know to start buying back in?