SPACs and changing optimism - A possible sign of changing sentiment

IPO and SPAC issuance provides a measure of market optimism and potential speculative excess. An increase in issuance tells us something about demand, but price performance against benchmarks provides a measure of market optimism in the face of uncertainty. IPOs provide a measure of optimism on potential growth of small new firms that are driven by new ideas and technology. Investors look at the filings and recent past performance and extrapolate this growth into future to form a valuation. 

SPACs have the process backwards. Rather than bet on the known past, investors buy into a management team that will find a future opportunity within a fixed time period. The SPAC investor forgoes known behavior for an unknown future. You are buying pure optimism on unknown opportunities. 

There are ways to track the SPAC market, the CNBC SPAC 50 index and the SPAK ETF. Both show strong optimism in early 2021 only to see a quick reversal. The SPAC ETF can be compared with an IPO ETF (IPO). Both show the same behavior with a slight upward bias toward the IPO portfolio. These moves may represent an early change in overall market sentiment.