When I have my headphones on, it’s for music, the first channel of - or podcasts on history. THE true crime by Stéphane Berthomet, I save them for the days when I am bedridden by a virus. There is also that of New York Times, The Dailywhich I occasionally catch during my morning walk, if the topic of the day appeals to me.
I ignore financial podcasts, except for one, Animal Spiritshosted by Ben Carlson and Micheal Batnick, two Americans, financial analysts, authors and bloggers on the stock market. I’m not telling you this to seem intelligent or above the fray, my favorite parts are when they digress to talk like teenagers about their tank, old films and the price of the new trio in I don’t know what obscure fast-food franchise.
But mostly the guys discuss the mood of the stock markets, investing, economics, business and statistics. Lots of statistics. They also relay anecdotes, like this tasty one: the stock of a Toronto technology company rose 1,767% (yes, one thousand seven hundred and sixty-seven) in one month because it’s called Bluesky Digital . Investors have confused it with the social network of the same name, which has benefited for a month from a strong increase in users, mainly deserters from the X network belonging to Elon Musk.
Funny, right?
The return ofAnimal Spirits
Another proof that I don’t want to mess around with my sources of information, even if I am a moderately diligent listener ofAnimal Spirits for five years, until two weeks ago I did not know the meaning of the expression Animal Spirits. She suddenly appeared in the news, and I was struck by it. Here is a sample:
- The return of animal spirits sets the stage for more upside in the months to come (CNBC);
- The stock market’s rise is about more than animal spirits (Barron’s);
- Tesla’s $350 billions stock surge driven by «animal spirits» (Bloomberg);
- Robinhood gets 129 % target hike as «animal spirits revive» (Investor’s Business Daily).
What it basically says is that “animal spirits” are currently galvanizing the stock market, unbridled enthusiasm seems to have gripped investors, and the tipping point roughly corresponds to the election of Donald Trump , at the beginning of the month.
The expression comes to us from the famous British economist John Maynard Keynes. In his work General theory of employment, interest and moneyKeynes evokes theanimal spirits in reference to human emotions that influence consumer trust. Today, we use it in the broad sense to designate our collective moods which color our financial decisions, and precisely when the lure of profit fuels stock prices.
Everything I tell you, I get from the Investopedia reference site that I have in front of me.
Change of mood
However, the stock markets had been performing well since well before November 6. They’ve been on an upward trajectory for two years, actually. The S&P 500, the main index of the American stock market, is going from record to record, it has climbed 25% since January 1st. The Nasdaq gained 26% during this time. The Canadian market is not left out, the S&P TSX having increased by 22% in 11 months.
Despite these significant gains, the market mood was rather cautious, with fears of a breakout continuing. This fear has vanished.
This is what the last title cited above translates: Robinhood gets 129 % target hike as «animal spirits revive». Robinhood is a stock trading app, much like Wealthsimple, in Canada. It allows you to build a portfolio, buy and sell stocks and shares of funds traded on stock exchanges with your phone. The enthusiasm for the stock market has prompted it to review its growth target.
I contacted Wealthsimple to find out what was going on there. I quote the Chief Investment Officer, Ben Reeves: “We have seen an increase in activity across all of our investment products, including cryptocurrencies, from our new and existing customers. There is undeniably an energy in the markets that Canadians benefit from. Over the past few weeks, following the US election, trading activity on our platform has increased by 50%.”
At Nationale, we are being much more vague as we approach the unveiling of the bank’s quarterly results, but we confirm an increase in the volume of business in brokerage activities.
The response from Desjardins is enlightening. The number of brokerage clients has increased by 28% since the start of the year compared to 2023, and the institution forecasts a 45% increase in the number of accounts compared to last year. It must be understood that expectations are enormous between now and December 31, projections fueled by a significant jump in new customers since November 6. Week over week, the number of account openings increased by 33% the week of Trump’s election, and by 67% the week after.
In short, there is a buzz! It takes enough for the value of a company’s stock to explode by more than 1,700% in a few weeks due to a mistake about its identity.
I remind you for information purposes, the last time we witnessed such a frenzy was in 2021, and the following year was painful for investors. It’s true that 2022 was marked by a surge in inflation and a rapid rise in interest rates.
I am therefore not saying that the current craze is a precursor to an imminent bear market. It could go up a bit further. But hey, I have already explained to you that on the stock market, the price to pay to obtain 8-9% annualized is to endure quite dizzying sequences of returns, going from +25% to -20%.
The long-term investor does not care about these gaps. It’s the one who comes in when it heats up who risks finding it intense.
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