Internet Bubble: Another Reminder?

The economic backdrop of the era of the internet bubble and our current time is very different. The global economy and geopolitical environment are now much more fragile. But there are similarities.

The most noteworthy is an extreme level of investor optimism, illustrated in the chart below by the surge in call option buying. In 2000 euphoria was produced by the seemingly limitless potential of the internet. In 2020, it is faith in vaccines and central banks to produce a quick and powerful recovery.

History suggests that investor complacency produced by over-optimism is inevitably punished by markets, particularly in eras, such as ours, that are rich in catalysts for volatility.

The anticipated volatility will produce both great risks and opportunities. Investors will have to be alert to adapt to changing circumstances.

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