News
Price and value don’t always move in tandem
By Michael O’Connor
In 2021, the S&P 500 hit new record highs in nearly one-third of all trading days and saw losses capped at 5%.
In a year of perpetual uncertainty, we saw one of the most robust and stable market performances in the last 25 years.
"The market can remain irrational longer than you can remain solvent" – John Maynard Keynes
Last year brought us the now infamous GameStop and AMC Short Squeezes, countless meme stock rallies and a 49,000,000% return for the meme coin Shibu Inu.
At this point, I think it’s blatantly apparent to everyone that price and value don’t always move in tandem.
In finance, we often expect the world to behave rationally. We carefully look to quantify the probability of each individual outcome, but not everything is measurable. We naively assume logic will prevail and underestimate the persistent irrationality of man.
As, investor Jim Grant reminds us:
"To suppose that the value of a common stock is determined purely by a corporation’s earnings discounted by the relevant interest rates and adjusted for the marginal tax rate is to forget that people have burned witches, gone to war on a whim, risen to the defense of Joseph Stalin and believed Orson Welles when he told them over the radio that the Martians had landed."
History is a perpetual stream of mistaken opinions and unpredictable outcomes. If you’ve relied on data and logic alone to make sense of the economy, you’ve been confused for one hundred years straight.
Instead of presuming everything is purely logical, it is important to realise that there are two sides to every investment: the numbers and the story.
While not always the case, in today’s momentum-driven market, ‘the story’ has consistently been more potent than the numbers. We have seen growth stocks soar off the back of compelling narratives about future possibilities with little numbers to back them up. SPAC’s, high growth stocks and altcoins have rocketed ‘to the moon’ all hitched to a promise of what could be.
This may be frustrating for many, but these market forces need to be acknowledged and understood. Blindly assuming that logic will instantaneously prevail is a sure way to underestimate the inherent risks of the market.
Crazy things happen in markets all the time. Don’t expect that to stop any time soon.
Outlook for 2022
In short, I view this to be the mid-cycle of the recovery. The growth rates seen early in the cycle will slow, volatility will increase, economic and earnings figures will be suppressed by higher inflation and less accommodative central bank policies. However, there are still opportunities for risk assets in the coming year, albeit with more modest expectations for returns.
I continue to favour US over international stocks. Large-cap and high-quality stocks look set to lead the way as markets will likely favour a tilt towards value stocks.
Fixed income remains an asymmetric trade with little upside, while alternatives will continue to become less ‘alternative’ as investors seek diversification in a rising interest rate market.
Risks abound, but opportunities will persist.
For my full, in depth 2022 outlook, go to www.theislandinvestor.com.
The fifth annual Pedal for Grace community fundraiser will take place in Firies on Saturday, September 5, with organisers aiming to push total funds raised past the €90,000 milestone.
Held in honour of local girl Grace O’Sullivan, who lives with Stargardt disease, the event brings together cyclists, walkers, and supporters from across the local community to raise vital funds for Vision Ireland. Over the past four years, the initiative has raised almost €90,000 for the national sight loss charity.
This year’s event offers options for all fitness levels, including a 60km route, shorter spins, and a walking course, with tandem options also available. Following the physical challenges, the day will feature a community barbecue, family fun activities, a raffle, and an evening of music and entertainment.
Grace was diagnosed with Stargardt disease, a genetic eye condition that affects central vision and causes progressive sight loss. The annual event was established by her family to raise awareness and support Vision Ireland’s work, which provides practical and emotional support, rehabilitation services, and assistive technology to help people living with visual impairments maintain independence.
Members of the public are invited to register in advance or support the event in Firies on the day. Full details and registration information are available on the Vision Ireland website.
Top golf scores at Mahony’s Point
Ivan Tagney and Aoife Twomey secured top honours at Killarney Golf and Fishing Club as members turned out in large numbers to compete for Captain Tomás Kelliher’s Prize on Mahony’s Point.
In the men’s event, Ivan Tagney claimed the Captain’s Prize with an impressive 42 points. Conor Dillon carded 48 points, returning the lowest score of the weekend, though he was ineligible for the main trophy without an established handicap.
Despite wet weather, the ladies section produced remarkable scoring on Sunday. Aoife Twomey took first place playing off 28 handicap, recording a nett 63. June O’Brien finished runner-up with a 67 nett, followed by Kay O’Connor in third with a 69 nett.
Captain Tomás Kelliher extended his thanks to the committee, staff, and volunteers for organising the flagship competition, praising the course condition and strong turnout across both events.
Results
Men’s Captain’s Prize 1st: Ivan Tagney (42 pts) Best Score: Conor Dillon (48 pts) 3rd: Joseph Sheahan (41 pts) 4th: Michael Cotter (41 pts) 5th: Emmet Scanlon (41 pts) 6th: Ian Sherlock (41 pts) 7th: Cathal O’Connor (40 pts) 8th: Aaron McCann (40 pts) 9th: Dan Quirke (40 pts) 10th: Mark Tuite (40 pts) 11th: Alan O’Meara (40 pts) 12th: Donal Begley (40 pts) Best Gross: Donal Considine (72) Category 1: 1st Kevin Leacy (39 pts), 2nd Ian Cronin (39 pts) Category 2: 1st Adam Carey (40 pts), 2nd Jack Crehan (40 pts) Category 3: 1st John McEnery (40 pts), 2nd Thomas Coleman (39 pts) Category 4: 1st Mike Dreelan (38 pts), 2nd Jason Reen (38 pts) Front Nine: Aaron Coffey (24 pts) Back Nine: Chris Myers (24 pts) Past Captain: Pat Cussen (38 pts) Over 70: Joe Geaney (39 pts) Committee Prize: Shane Horgan (38 pts) Guest Prize: Jack Kelliher
Ladies Captain’s Prize 1st: Aoife Twomey – 63 (28) 2nd: June O’Brien – 67 (20) 3rd: Kay O’Connor – 69 (13) 4th: Louise Langan – 70 (19) 5th: Mary Tobin – 71 (20) 6th: Geraldine Tarrant – 71 (26) 7th: Kathleen O’Keefe – 71 (19) 8th: Noreen O’Callaghan – 72 (18) 9th: Anne Moynihan – 72 (2) 10th: Breda Duggan – 72 (29) Best Gross: Kelly O’Donoghue (76) Front Nine: Kate O’Leary Back Nine: Sarah O’Brien 13-Hole Competition: Maud Malone – 24 pts (28)
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