“Volatility is the friend of the unleveraged long-term investor. We much prefer the bumpy road to higher rates of return than a smoother rise to more modest profits.” Bill Ackman

Last week's closing brought volatility to particularly high levels and also escalated investor fears. The current week run completely differently with volatility falling 43% from its highs, giving an amazing session on Tuesday with the indices closing more than 2.0% higher and the Nasdaq over 3.0%. This session has been the best since last March.

It is a fact that since February 2020, there has been a significant change in the course of the volatility index, which remains well above 15 and whenever there is reason to increase volatility, the index jumps even 50% in a session.

The losses recorded by the key indices were not corresponding with the VIX soar but the fear provoked by such a rise as well as the pessimism that immediately overwhelms the Media, contributes to significant portfolio restructuring. This is expected to be a new regularity in the coming years.

Referring again to the above words of Bill Ackman, corrections are the oxygen of the markets, as they increase future returns. It is better for the market to correct than to move upwards for a long time but with indifferent returns, when in fact the performance of the S&P 500 itself is now negative.

To provide a statistical proof of the above, statistical studies show that when the VIX is in the range 30-40, then the average return of the S&P 500 for the next 12 months is about 15%, with the degree of verification of this statistic being 82.4%.

Markets are expected to keep on climbing the wall of worry. And there may be many reasons that worry investors, and this may be the most positive element that will lead to a continuation of the upward movement. After all, stocks remain the best asset class in the long run for investors. And the table below simply emphatically confirms why stocks will continue to rise. Because it is the only asset class that if we adjust it to inflation, it continues to give very high positive returns, when they can no longer be granted by any other asset class.

This is an important fact to keep in mind for 2022. Another fact we have to keep in mind for 2022 is the possibility that the Fed has made wrong estimates for inflation under the pressure of the circumstances. This is because other G4 central banks have different views on inflation.

ECB: Inflation is expected to de-escalate in 2022

Τhe attitude of the ECB is typical and states that inflation is at these levels due to three parameters that emerged due to the situation created by the pandemic. These parameters are expected to be normalized by 2022 and inflation will be brought back to normal levels.

In our view, a significant part of the rise in inflation is due to the so-called demand shock, which has already begun to normalize and this will lead to an improvement in inflation figures.

Friday's data will show whether inflation is close to a peak or if it has already reached it. It is clear that the inflation announced for November will also affect Jerome Powell's speech on December 15, at the last conference for 2021. What investors expect is a confirmation that the Fed will begin the normalization of monetary policy gently and not aggressively. Given the volatility in stocks and bonds in recent weeks, such an intervention is considered absolutely necessary.

Nasdaq: IPOs king

Technology may be a highly volatile industry, but it is the industry that attracts the most investment capital, as those who typically finance mainly start-ups say: "A successful company can make so much profit, that even if another 20 fail, the losses will have been covered and beyond".

In 2021, the Nasdaq has surpassed the NYSE, as total IPOs on the Nasdaq reached $ 191.38 billion while on the NYSE they reached $ 109.25 billion. The dot.com bubble made companies choose the NYSE for many years for IPOs, but now something has changed. In 2021, 686 new companies entered the Nasdaq versus 265 that entered the NYSE.

The Nasdaq stock market also selects the so-called SPACs, which aim to merge with private companies, which in this way become listed, avoiding the bureaucracy and high costs of traditional IPOs.