Michael Novogratz sees high volatility heading into next month’s November 3 US presidential election.
Investors are anticipating the worse likely outcome with maximum uncertainty, a contested election with 60% of investors surveyed of the opinion that the election result will be contested, according to the BoA Global Fund Manager Survey.
In the worst-case scenario, it could take weeks before the winner of the US presidential election is known.
“Investors are anticipating the worse likely outcome with maximum uncertainty”
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That could have geopolitical and financial market implications, which is why Michael Novogratz sees high volatility
Michael Novogratz is the CEO of Galaxy Digital. He made his fortune by being an early cryptocurrency investor, which has earned his nickname as the cryptocurrency king.
Michael Novogratz sees high volatility as the election nears, which he believes will mark the end of the recent speculative frenzy and malinvestments, particularly in technology stocks
“We are close to the end of what I see is a speculative frenzy” said Michael Novogratz.
“We are close to the end of what I see is a speculative frenzy”
If you go back to 1999 WorldCom, which was the bellwether stock of the internet spilt in December, 31st, the next two days it exploded up just like Telsa and that put in its high for the whole cycle,” said Michael Novogratz. For those of you too young to remember, MCI WorldCom Inc. declared a three-for-two stock split in late 1999, and two years later, the telecommunications giant went bankrupt in July 2002.
“I think we are going to unwind this crazy leverage. What is interesting is that this bull market is not giving up, it is like a bull with a bit between its teeth, climbing up a muddy hill, and it just keeps charging while other things are falling off” said Michael Novogratz.
“If you look at the 1999 internet sell-off, after the big selloff you had a rally back, but you don’t make new highs again” – Michael Novogratz
Michael Novogratz sees high volatility with a big risk-off sentiment, as the election nears
Michael Novogratz believes that we could see the type of risk-off sentiment experienced in March, which saw investors sell off even safe haven assets and piling into cash.
“If there is a big risk-off, all assets will go down” said Michael Novogratz.
“I do think that the dollar and bitcoin will decouple from risk once you get the weak hands out” he said. “It is just leveraging coming out of the system, and there is still a lot of cash in the system” he added. Indeed, the major central banks in cahoots have expanded their balance sheets by $7.5 trillion, and global fiscal actions have amounted to $12 trillion in response to the 2020 pandemic great lockdown, which has left economies in tatters, a state not seen since the Great Depression.
Michael Novogratz sees high volatility ahead, and he thinks the highs have been put in for technology stocks, particularly Apple and Tesla
“If you look at the 1999 internet sell-off, after the big selloff you had a rally back, but you don’t make new highs again. I think we are going to be in one of those to and throw environment of high volatility going into this election” he said.