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The manic-depressive Mr Market

Nov 15, 2022

In his book “The Intelligent Investor” first published in 1949, Benjamin Graham describes financial markets as Mr Market, an allegory of what he believed were the irrational or contradictory traits of the stock market. Mr Market has indeed many traits of a manic-depressive, going from overly pessimistic to euphoric in a couple of trading days on little fundamental news. Fast forward to November 2022. In the recent rebound, the CNN fear and greed index, measuring stock market behaviour with different factors like market momentum, put and call options, and market volatility has moved from extreme fear to greed in a matter of 1 month! European markets now trade above their 200 and 50 days moving averages! At ECP, we are guided by fundamentals to assess our fair values of the businesses we invest in. This gives us a more stable assessment of the investment opportunities ahead and makes us less dependant on the unpredictable moods of Mr Market.

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