Skip to main content

Why Did Stock Values Increase on June 13th?

Emblem of Qatar

After a brief slide, stock prices in the U.S. turned around and headed up on June 13.

Neither the slide nor the upward bounce was of historic significance by itself. The S&P 500 closed June 8, Thursday, at 2433.78. It closed the next day at 2,431.23. The following Monday, down somewhat again, to 2,429.48. So, as I say, on Tuesday it rose, closing at 2,441, reversing (by more than double) the losses of the two previous days.

This could be simple "random walk" stuff. But ... what brings it to mind is the way this particular bounce immediately became an item in political debate. Because June 13th happened to be the day Attorney General Jeff Sessions testified before Congress about Russia, Comey, and so forth, Trumpites drew a connection via social media even as Sessions was talking.

Mr. Market presumably approves of Trump, wants a vigorous Trump administration, and so cheered as Session rebuked that administration's foes. That's their story.

It has some obvious holes in it. Instead of discussing them in depth, let's just identify one of the (many) alternative hypotheses about the rise in stock prices that day which are equally plausible.

Perhaps Mr. Market believes that his interests are bound up with the interests of the royal family of Qatar. The week ending June 9th was a bad one for that family, with may of the other Arab states lining up against it, with the approval of the US administration. But by Tuesday the worse seemed to have passed. Both Turkey and Iran made it clear that they supported Qatar against its closer neighbors. Also, the United Arab Emirates backed off at least a bit, issuing a statement on Tuesday that said there would be "no military component" to the actions against Qatar.

It seems to me at least as plausible that small changes in a broad based index can be traced to the troubles and relief of the House of Thani as that they need to be traced to the troubles and relief of the House of Trump.

Another problem with the theory of course is that Sessions didn't do well.  I don't know of anyone who was favorably impressed by his testimony who wasn't very much primed to be favorably impressed, and their views had presumably already been discounted. It is hard to imagine any stock analyst or market maker who would have been hanging on the testimony and who would at some point Wednesday have shouted "NOW is the time to buy US equities again!"

The broad lesson here, though, is that trying to read the mind of the market on a day to day basis is a fool's errand. And it is so for philosophically weighty reasons, but I've written about them before -- in this blog and elsewhere -- and won't give one of those lectures again just now.

Labels:

Comments

Post a Comment

Popular posts from this blog

A Story About Coleridge

This is a quote from a memoir by Dorothy Wordsworth, reflecting on a trip she took with two famous poets, her brother, William Wordsworth, and their similarly gifted companion, Samuel Taylor Coleridge.   We sat upon a bench, placed for the sake of one of these views, whence we looked down upon the waterfall, and over the open country ... A lady and gentleman, more expeditious tourists than ourselves, came to the spot; they left us at the seat, and we found them again at another station above the Falls. Coleridge, who is always good-natured enough to enter into conversation with anybody whom he meets in his way, began to talk with the gentleman, who observed that it was a majestic waterfall. Coleridge was delighted with the accuracy of the epithet, particularly as he had been settling in his own mind the precise meaning of the words grand, majestic, sublime, etc., and had discussed the subject with William at some length the day before. “Yes, sir,” says Coleridge, “it is a maj...
9 comments
Read more

Searle: The Chinese Room

John Searle has become the object of accusations of improper conduct. These accusations even have some people in the world of academic philosophy saying that instructors in that world should try to avoid teaching Searle's views. That is an odd contention, and has given rise to heated exchanges in certain corners of the blogosphere.  At Leiter Reports, I encountered a comment from someone describing himself as "grad student drop out." GSDO said: " This is a side question (and not at all an attempt to answer the question BL posed): How important is John Searle's work? Are people still working on speech act theory or is that just another dead end in the history of 20th century philosophy? My impression is that his reputation is somewhat inflated from all of his speaking engagements and NYRoB reviews. The Chinese room argument is a classic, but is there much more to his work than that?" I took it upon myself to answer that on LR. But here I'll tak...
17 comments
Read more

Recent Controversies Involving Nassim Taleb, Part I

I've written about Nassim Taleb on earlier occasions in this blog. I'll let you do the search yourself, dear reader, for the full background. The short answer to the question "who is Taleb?" is this: he is a 57 year old man born in Lebanon, educated in France, who has been both a hedge fund manager and a derivatives trader. He retired from active participation from the financial world sometime between 2004 and 2006, and has been a full-time writer and provocateur ever since. Taleb's writings for the general public began where one might expect -- in the field where he had made his money -- and he explained certain financial issues to a broad audiences in a very dramatic non-technical way. Since then, he has widened has fields of study, writing about just about everything, applying the intellectual tools he honed in that earlier work. As you might have gather from the above, I respect Taleb, though I have sometimes been critical of him when my own writing ab...
4 comments
Read more