1 minute read
Quantology Capital Management
JULIEN MESSIAS
FOUNDER, HEAD OF R&D, QUANTOLOGY CAPITAL MANAGEMENT
Many market pundits and economists are forecasting that inflation will be the key topic of 2022, so it seems already priced in. But, in addition to this known known, there are still many known unknowns and even more unknown unknowns. Will we get back to a new normal with central banks hiking rates? At which pace? Until which level?
At Quantology Capital, we think that the real alpha-maker is dispersion, and that this new paradigm with less dovish central banks will lead to higher dispersion in the equity markets. Since the upcoming policy of central banks is already disclosed, making money is much more linked to company-related events than to global macro.
If we had to bet on a sector or a topic, we would choose the metaverse. The success of the movie ‘Ready Player One’ by Steven Spielberg (2018 – the initial book by Ernest Cline is even better!) and reduction of each human being to their individual status increases their need for socialisation through gaming and dealing in the metaverse, thanks to augmented or virtual reality.
But beware, as this investment universe is shaky! Robust asset management and risk management techniques are absolutely needed to generate alpha.
In the broad, short future, an even more psychologically-driven equity market will be at the forefront. Today, the new normal for Generation Z is to invest in financial markets through apps on their smart phones. Thus, it enables many newbies to buy and sell stocks, with this new generation being far more sensitive to tech-gurus than to fundamentals – just look at the astonishing share run of Tesla, despite all the warnings from old-school fundamentally-driven stock pickers.
Remember January 2021, when this “wisdom of crowds” sparked huge rallies on junk names, such as Gamestop or AMC, causing some big hedge funds such as Melvin Capital to plunge?
Now, institutional investors must take this new power into account, as it is lethal enough to torpedo your portfolio. In 2020, retail investors did better than experts [1]. It’s time to trust, or at least to be inspired by the crowd. [1] Welch, I, (Dec. 2020) The Wisdom of the Robinhood Crowd, NBER
