I'm sure most of us are aware of the cyclical rotation that's occurring right now, in addition to the unique elements that the Russia/Ukraine conflict has been placing on markets.
Just like tech was all the the rage for last 2 years, many investors are now chasing value stocks and commodity funds. The massive moves we've seen in these areas over the past few months speak to this.
For example: Coca-Cola (KO) went from $53 in November 2021 to $63 recently, which is a 17%+ move. All the while, KO's earnings have decreased in the same period of time*.* Even if the EPS was the same, KO did not become a 17% bigger company in the same period. KO also is not a company that is massively growing. It would appear that investors rotating from tech “discovered” KO and drove the price up.
KO has since fallen ~8%. The Ukraine conflict had an effect for sure, but I imagine many previous shareholders took the opportunity to sell past $60 and locked in their recent gains.
The trading volume on the wheat futures fund WEAT has exploded over the past several trading days, as concerns about Russia and Ukraine's wheat exports proliferate. The price increased 47% in just a few sessions. Yet, Russia and Ukraine's combined wheat supply is roughly 30% of the global supply.
It would not at all be surprising if a large amount of this volume is speculative interest (i.e., investors buying in because they think the price is going to go up and they can offload it to someone else) rather than natural changes in supply and demand. There has not yet been any data relating to the exact changes of these exports and what the demand will ultimately be. There's a real chance it won't settle on 47% depending on how the next several months play out.
Oil has a similar story. Both oil and wheat may very well continue to go up, but they both have come down significantly over the past few days, suggesting that much of the recent gain was pure speculation.
As we've seen investors chase growth stock rallies over the past few years, anything that looks like it's going up will attract investors. And we have significantly more investors in the markets than we did in years past. That would support a hypothesis of there being increased speculative interest.
As we've seen the steep selloff in tech especially after a massive runup, it wouldn't be impossible for the value stocks to drop like KO after their recent runup, as well.
My point here is (TL;DR): It would be wise to be extremely careful to not FOMO into any of these new trends, as many people are now waking up to the reality of the market we're in. Long-time holders of value stocks have seen big gains recently while the valuations in those stocks are arguably getting stretched. Buying KO or BRK.B at a bad price is not very different than buying a tech stock at a bad price. If you're actively investing, you should be trying to get ahead of the market rather than being the last 10% of people to buy KO at $63. For active investors, Develop a clear thesis for any investment that is not just based on “it's going up”, set a timeline to test it, and be quick to cut losses if you're wrong–which could be over several years if your thesis is long-term.
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