10 interesting facts about the financial market that you did not know
Historically, the month of August has been associated with volatility. Some attribute this to the low levels of trading on the market, which accentuate the fluctuations in asset prices. The truth is, though, that a record number of events with an impact on the markets have occurred in this month.
Did you know that the market capitalisation value of Netflix is similar to that for the whole Mexican Stock Exchange? This is just one of many curiosities about the financial market that you did not know.
Did you know that…
1. … The average fall in bear markets in the US since 1929 is 36%? Also, that bear markets last on average 299 days?
2. … that the US entered bear market territory in just 16 days? And that this was faster than the Crash of 1929 and the second fastest since 1987; but this bear market lasted only 34 days and is the shortest in history?
3. … Every year with a ’20’ in it has had a bubble? For example, the South Sea Company in 1720, mining in the United Kingdom in 1820 and the Dow Jones in 1920?
4. … One of the defining characteristics of a market is the concentration of value in just a few companies? Also, that the joint market capitalisation value of Google, Amazon, Apple, Microsoft and Facebook with respect to the S&P 500 is around 25% and is the highest concentration in history?
5. … In the tech bubble of 2000, these 5 tech companies accounted for around 18% of the S&P 500 market capitalisation?
6. … About 84% of the assets of the companies in the S&P 500 are intangible (e.g. patents, licences, trademarks, software licences and databases)? And such intangible assets accounted for less than 70% in 1995 and less than 20% in 1975?
7. … More than 340 million people went online for the first time in 2019, and that this is more people than the entire US population? Also, that more than 1 million people have started using social networks for the first time, which is equivalent to 12 new users per second?
8. … The market capitalisation value of companies in the US technology sector is greater than the whole market cap in Europe?
9. … The market capitalisation value of Netflix is similar to that for the whole Mexican Stock Exchange? Also, that Facebook’s market capitalisation value is almost 1.4 times that for IBEX in Spain?
10. … During the last 10 years, companies in the ‘value’ segment (with low valuation multiples) compared to ‘growth’ companies (trading at high multiples due to an expectation of growth, such as in technology) have had the worst relative profitability, and even worse than that seen in the technology bubble
Source: compiled by the author using data from Bloomberg and BofA.
Periods of panic and/or euphoria bring to mind the recurring question of how to control one's emotions and avoid making hasty decisions. There are no general recipes for this because everyone has their own personality shaped through their experience, knowledge, etc. For example, a person who likes extreme sports will have a different concept of risk than, say, someone who likes more traditional sports.
The expectation of global synchronised growth, that was gaining traction at the beginning of the year, has been removed by the COVID-19 pandemic, which has led various authorities worldwide to impose extreme measures to mitigate the impact of the virus.