The Steeper the Uptrend, the Greater the Volatility

The Baltic Dry Index (BDI) was trading at around 4,962 points at the end of September 2021 versus 4,220 points by mid of the month 2021 running at full speed and drawing an even steeper upward trend. One could argue that this is the absolute definition of a bull market where when you are long you definitely get “dizzy”. The current levels are simply too high given the norms known previously in the market for many years.

Concerning the previous period, the Baltic Dry Index traded at around 3,650 points in mid-August 2021 versus 3,281 points on August 4, 3,058 points on July 21st, 3,179 pts on July 5th, 2021, but also compared to 2,420 pts around May 2021.

Now that the “music” is getting even louder and the “party” is at its climax, presumably but not for sure, some more points can be made as continuation to our previous blogs:

–First, with the market at such highs, the optimists are even stronger and the pessimists have started faltering. We must recognize this, at least.

–It also makes sense to expect that the number of participants believing in a continuation of this unprecedented bull market will continue to increase in number, so the market may be self-driven towards even higher levels. Yes indeed, this could be also an option.

–But on the other hand, we all know that the steeper the uptrend, the greater the volatility; this has been always the case in the markets irrespectively of securities assets and so on, traded in them. So can we really escape the volatility here? This question is just a rhetoric one.

Overall, dry bulk market is a thrilling market place, nobody can say the opposite, with many more “thrilling” episodes ahead.

Source: Bloomberg

FIGURE 1: Baltic Dry Index (BDI) – Last 1 Year up to September 2021     

[Bloomberg ticker: BDIY:IND, BDI Baltic Exchange Dry Index]

Source: Bloomberg, Trading Economics, https://www.marinevesseltraffic.com/ 

FIGURE 2: Baltic Dry Index (BDI) – Last 36 Years up to September 2021    

[Bloomberg ticker: BDIY:IND, BDI Baltic Exchange Dry Index]

Source: Bloomberg, Trading Economics, https://www.marinevesseltraffic.com/