Wall Street discovered that mechanical forces move stock prices. Took them roughly ninety years.
The headline says there's noise making it harder to read the market. False. The noise is the market. Index inclusion moves stocks because money flows into indexes. Options hedging moves stocks because dealers hedge their books. Policy-driven flows move stocks because central banks print money and governments mandate where pension funds park it. None of this is noise. This is the signal. The signal is that price discovery died and nobody noticed because they were too busy buying SPY calls.
Retail traders spent two decades learning about P/E ratios and revenue growth and competitive moats. Wasted effort. Should've learned about gamma exposure and passive rebalancing schedules. But that would require reading something longer than a TikTok caption.
The article notes that rarely has so much attention been placed on these mechanical impacts. Rarely. As if this is new. As if the entire market hasn't been a mechanical casino since ETFs became larger than most countries' GDP. As if anyone trading GameStop in 2021 was analyzing free cash flow.
Here's what changed: financial journalists finally noticed what technical analysts have been saying for fifteen years. Fundamentals don't set the price anymore. Flows do. And now they're calling flows "noise" because admitting that security analysis is dead would require them to learn a new skill set.
The true state of the market is that there is no true state. There's just a giant pile of leveraged bets getting hedged by algorithms that don't care what the companies actually do. You're not investing in businesses. You're trading the exhaust fumes of other people's portfolios getting rebalanced on a Tuesday because some committee added a stock to an index.
But sure, keep checking earnings reports like they matter.
Photo by Ishant Mishra on Unsplash
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