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How to Outwit 99% of Investment Pros

Was COVID-19 a “bullish event"? No. Here’s the real answer why stocks rose as the pandemic raged.

by Bob Stokes
Updated: November 11, 2021

Waves of social mood fluctuate in accordance with the Wave Principle and determine prices in financial markets.

Moreover, these same waves regulate the tenor and character of social attitudes and actions.

The key point is that social mood is the cause. It is endogenous. Prices in financial markets and events in society are the effects. They are exogenous.

However, most people believe the opposite is true.

For example: Most people believe that recessions cause business people to be more cautious. However, Elliott Wave International posits that cautious business people cause recessions.

Or, consider the widespread notion that scandals make people outraged. In truth, outraged people seek out scandal. Consider that when mood is positive, fodder for scandal is often dismissed.

You can also flip around the notion that nuclear bomb testing makes people nervous and say that nervous people test nuclear bombs.

Here's another example: Many observers believe that a rising stock market makes investors increasingly optimistic. However, the evidence suggests that optimistic investors cause stock market prices to rise (and pessimistic investors cause market prices to fall).

Elliott Wave International's Asian-Pacific analyst, Mark Galasiewski, drove the point home further when he said this at the Chartered Market Technician Association's Asia-Pacific Summit in October:

If you were able to make that one counterintuitive leap that the same endogenous mass psychological swings that create patterns in the stock market also drive other headline social events, then you have already won half the battle in the market and you understand stock market movements better than 99% of industry professionals.

Social mood swings from extreme optimism to extreme pessimism and back again.

By the time that these social mood trends show up as major news or events (positive or negative), that's when the pendulum is set to start swinging in the other direction.

Recessions, scandals, nuclear testing and so on were mentioned as examples of what may occur during negative mood trends.

Let's add epidemics to that list. Yes, Elliott Wave International has observed a relationship between bear markets and infectious disease.

Using this knowledge, our April 3, 2020 Global Market Perspective said:

Asian-Pacific and emerging market stocks began bull markets amid the SARS epidemic of 2003 and the Swine Flu epidemic of 2009. They should similarly embark on a bull market amid the Covid-19 pandemic of 2020.

Indeed, look at this MSCI Emerging Markets Index chart which Mark Galasiewski showed at that Asia-Pacific Summit previously mentioned:

MSCI EM vs Epidemics

As you can see, an uptrend did ensue amid Covid-19.

However, it would be wrong to say that epidemics are bullish for the stock market. That's that "exogenous" thinking trap which was discussed above. A proper way to think about it is that when social mood is at its lowest, epidemics are more likely. That's why they have so often marked a bottom, not a top. As Mark said:

Notice that these three major infectious diseases spread widely toward the end of major bear markets.

This is invaluable information for any investor. Imagine having this knowledge back in March 2020, when the first wave of the pandemic hit and everyone panicked!

Elliott Wave International could help you spot similar moments going forward. All of our global analysts use the repetitive patterns of social mood to forecast some 50+ financial markets around the world.

Tap into their insights now by following the link below.

EWI’s Analysts Set Price Targets for Major Global Financial Markets

EWI's analysts set price targets for global stocks and bonds, cryptocurrencies, metals, oil and other markets... in accord with the Elliott wave model.

Price targets are a far more effective strategy for investors and traders, versus making impulsive decisions "in the moment."

Most investors feel highly optimistic at major tops and deeply pessimistic at major bottoms. In other words, investors' emotions have historically betrayed them at key turns.

Learn the price targets our Elliott wave experts have set for key global financial markets -- and why.

You may do so by reading our in-depth coverage of 50+ worldwide financial markets via our Global Market Perspective.

If your main interest is the Asian-Pacific, you may elect to subscribe to our Asian-Pacific Financial Forecast.

Follow the link below to find out more.

Asian-Pacific Financial Forecast

$29

At the beginning of each month, you get a 30-60 day look ahead at the markets. With insightful charts and text, this publication lays out expected trends and turns in this region.

Coverage includes the Nikkei 225, ASX200, Hang Seng, Shanghai Composite, S&P Nifty, SENSEX, Strait Times Index, MSCI Singapore, MSCI Taiwan, TAIEX, KOSPI and more

Global Market Perspective

$59

Gives you clear and actionable analysis and forecasts for the world’s major financial markets.

Get insights for the U.S., European and Asian-Pacific main stock indexes, precious metals, forex pairs, cryptos (including Bitcoin), global interest rates, energy markets, cultural trends and more.

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Bitten by FANG? Clocked by Cryptos? -- 'Air Pockets' Everywhere

Down more than 25%, the NASDAQ is "officially" in bear-market territory. "Big whoop" as they used to say -- some of the hi-tech darlings have already been cut in half and then some. Bet the folks down 50% or more in their so-called investments are glad to hear they're "official." And now Bitcoin, the King of Cryptos, has hit an "air pocket" of its own and fallen below $30,000. Wonder if that's officially a bear market, too? This excerpt from our new, May Financial Forecast explains how it all fits together.

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Bitcoin: How to Spot Signs of Fast Reversals

Bitcoin and other cryptocurrencies are no strangers to volatile, sharp reversals. If you get caught up in one unprepared, it's not a good feeling. But watch our Crypto Trader's Classroom instructor show you how Elliott waves can help take the "surprise" out of crypto "surprises."