Once again, feelings of invulnerability-and the intense certainty that investors have that these companies will not only transform the future but be the greatest beneficiaries of that change-have been mirrored by riveting stories and high stock prices. More recently, we’ve seen a similar surge in AI-related stocks, as investors’ extreme belief in those companies’ bright futures has led to a flood of cash into the shares of the likes of Nvidia, Microsoft, Google, and Apple, as well as a swirl of small start-ups. Shares of EV maker Telsa were up ten-fold from their pandemic lows while shares of hydrogen fuel cell company Plug Power were up twenty-fold. As you would expect, the prices of these instruments, too, mirrored the extreme confidence investors had in that imagined future. Not a year from the pandemic outbreak, investors stampeded into cryptocurrencies, SPACs, meme stocks, and other highly speculative, abstract investments certain that their future would be blisteringly bright. With a mass vaccination effort underway and consumers flush with cash from Washington D.C., there was renewed excitement about innovation and the economic growth it would bring. The stock price of travel related companies like Carnival Cruise Line and American Airlines, for example, collapsed while shares of pizza delivery company Dominoes soared on the expectation that we would be forced to stay home indefinitely.Īt the other end of the sentiment spectrum, in early 2021, we saw the reverse. With that, market prices precisely mirrored how bad we felt. There was a clear equilibrium between our shared feelings of powerlessness and uncertainty, market narratives and our actions. And at the late-March 2020 lows in confidence, everyone believed things could only get worse and was acting on those feelings and stories-including business leaders and policymakers. As investors panicked, and felt more and more vulnerable, they swapped the unpredictability of stocks for the certainty of cash. In fact, search volume for the term “coronavirus” was all but mirrored by a comparable decline in stock prices. As the outbreak unfolded, the stories we told ourselves and others about what was ahead became bleaker and bleaker. Three years ago, you could watch our imagination crumble as our confidence fell. As the financial markets show over and over, often those two can be very different. They explain what we think will happen, not necessarily what will happen. And here is what may surprise you: If you track the stories investors and the financial media share, you’ll see that they are far better reflections of how we feel now than they are accurate predictions of the future.
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