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The telegram the mood did not read — April 2023

◦ Written under index methodology v1 (in effect until 15 Jul 2026). The current series is v2 — readings quoted here may differ from those shown today. See the methodology.

Episode

The extreme

Stock prices made peace with risk, and the mood took no notice. The cyclical sectors, punished in March, returned to neutral ground; the safe havens that had been charging a premium began to give it back. But the mood gauge never lifted off the floor where it sat. In numbers: the Cyclical/Non-Cyclical ratio climbed back from well below its average to the line itself, Utilities/IBOV slid from above its average to below it, the intermarket reading crossed from 49.87 to 59.02, and the Perene Risk Index jumped from 63.0 to 82.4 — while the Ânima index opened and closed the month at 20.6, in the same dug-in gloom. Off in an isolated corner, the Financials/IBOV ratio stretched far from its own average — the most discordant point on the whole grid.

What happened next

The mood eventually read the telegram — and read too much into it. Over three months, Ânima ran through 20.6, 46.5, 69.2 and closed July 2023 at 84.4, in the territory the engine calls extreme optimism. The direction the structure had signaled in April was confirmed in sentiment. But the rehabilitation of prices did not hold to the same degree: by July the blocks that would have validated the euphoria were already retreating, and in October 2023 the cyclicals that April had rescued were taking a beating again — the Cyclical/Non-Cyclical ratio collapsed back below its average. The capital changed clothes, not houses.

What did not happen

April's risk-on did not turn into a cycle. Anyone who read the reorganization of prices as the start of a durable rally got the reach wrong: within a year, April 2024 would find both axes at the bottom together — Ânima at 14.1, Perene Risk at 7.3, the cyclicals sunk well below their own average. The extreme premium on the banks did not hold either: by July, Financials/IBOV had already given back most of its distance from the average. The extreme came undone, as extremes tend to do. And the convergence that finally arrived was not the optimistic one the structure hinted at — it was agreement in fear.

The honest verdict

The structure did in fact lead the mood: the telegram was real and sentiment read it, late and overdone. But anticipating the mood is not the same as anticipating the cycle. The reorganization of prices marked a mood swing of a few months, not a risk regime that would last. Reading "the structure comes before sentiment" as "the structure predicts the future" would have missed the reunion of both sides down at the bottom, a year later.

Continue reading: The structure leads the mood · Ânima vs. Perene Risk — mood against appetite · Euphoria without confirmation (June 2023) →

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Characters: Mood