Investors get whipsawed in the equity market rollercoaster

This week’s update is co-authored with Zhenyi Zhang (who is our BPO manager and senior Data Analyst). And also apologies for the rather long pause since our previous update (we missed you too!!).

A ‘text book case’ of Whipsaw

Equity markets have been volatile. This volatility is nicely captured in the chart below (of QQQ — Nasdaq 100 ETF) that shows the price movements over the last few months

Price Movement Chart of QQQ since Sep last year

The equity market rallied from Oct to mid-Nov’2021, followed by a correction as a result of the Omicron variant widespread and U.S. Federal Reserve’s indication of upcoming rate hikes.

Subsequently, we saw a sharp rally in the last 2 weeks of December, ending off 2021 on a bright note.

The happy narrative didn’t last long — the Santa Claus effect was quickly written off by a massive selling in Jan’2022, mainly fueled by the rising geopolitical tensions happening around Ukraine, resulting in more than 100% increase in the Volatility Index (VIX) from 31Dec2022 to 24Jan2022, illustrating a huge spike in the market’s level of fear and uncertainty.

The investors (sadly) got really whipsawed in this rollercoaster of a market

Chart showing Investor Activity in Equity markets during the same time period

Fixed Income Market was easier to read

The fixed income market has pretty much been moving in a one-way street ever since the U.S. Fed indicated its tapering intentions in Oct’2020.

This fall has accelerated in 2022 as the market is expecting the Fed to sharply raise interest rates in March as consumer prices rose 7.5% in a year, hitting a 40-year high

The poor overall outlook for fixed income can be seen in the Vanguard Total Bond Market ETF price chart below, which shows the accelerated fall since the start of 2022.

Price movement chart of BND (Vanguard Total Bond Market ETF)

Investors got this one right and have been exiting the market for some time now

Investors accelerated their Fixed Income exists in sync with falling bond prices

Buying Interest in T-Bills and TIPS

There is good buying interest in T-Bills and TIPS

Amongst the market movements and uncertainties, it is interesting to note that one particular security under the “Others” market has been logging net buy volumes since Q4’2021 — Treasury Inflation-Protected Securities (TIPS), which has been an ideal protection against the current heat in inflation levels.

Conclusion (tl;dr)

  • Massive equities selling in Jan’2022, Feb’s data doesn’t look optimistic
  • Investors’ trades followed the ups and downs of the equity market
  • Fixed Income securities have been sold since Fed’s tapering intentions, and selling is accelerated since the start of 2022
  • Consistent buying of TIPS had been observed amongst the market movements and uncertainties

Please note that this newsletter is just a data analysis of actual investor behavior and does not constitute investment advice in any form.

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Canopy is an investment reporting and analytics company. Tanmai Sharma, Founder & CEO, analyses investment trends seen in Canopy’s meta-data

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Tanmai Sharma

Tanmai is the CEO and Founder of Canopy, which is an investment reporting and analytics company. Here he analyses investment trends seen in Canopy's meta-data