We are in a vibe-driven market. A vibe market is driven by perceptions, not expectations, tweets, policy, sound bites, and analysis. We don't have to make a judgment on the quality or type of vibe. There are both good and bad vibes. The type of vibes can change within days. It changes reactions and valuation by driving short-term moves that increase volatility. The large intra-day ranges are the result of the vibes. Traders have to "feel" the vibe and show an immediate reaction.
A vibe market is not a math-driven market. Valuation models based on quant relationships will not be effective. In a past life, we would call this market noise. Noise may not have a cause. In this case, we know the cause of the noise: short-term news that has uncertain longer-term meaning or limited context. We are seeing the impact of vibes on the poor performance of systematic traders. We expect this underperformance to continue as long as we have the vibes driving markets.
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