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Sanity is seeping back into markets. Fantasies are fading.

Good news? That all depends on where you stand. For marijuana investors, ride-hailing enthusiasts and bitcoin believers, realism is proving painful. They’ve all lost significant money in recent months.

WeWork executives are also nursing their wounds. We Co., parent of the hipper-than-thou purveyor of office space, had to postpone its initial public offering (IPO) this month after it turned out that potential investors cared less about the chief executive’s charismatic personality than his habit of incinerating cash.

Endeavor Group Holdings Inc., owner of Hollywood’s biggest talent agencies, abandoned its own IPO plans this week. Peloton Interactive Inc., the high-tech exercise-bike vendor, did go public, but saw its shares tumble.

Its slump continues a wider trend: Fifty seven of the 120 companies that have gone public this year on U.S. markets are now trading below their offer prices, according to data from Renaissance Capital and CNBC. Three of the most eagerly awaited debuts – software developer Slack Technologies Inc., and ride-hailing services Uber Technologies Inc. and Lyft Inc. – have also been among the biggest disappointments.

In Canada, many of the marijuana stocks that soared last year are tumbling as production problems and marketing delays deliver a jolt of reality to inflated expectations. The Horizons Marijuana Life Sciences Index ETF, which holds a basket of cannabis-related shares, has lost half its value since last October.

Bitcoin, the great enthusiasm of late 2017, is also sputtering. The cryptocurrency staged a massive rebound earlier this year, but has been sliding since early August.

The shift away from speculative investments can be read as a verdict on a slowing global economy. Look anywhere and you see evidence that smart money is growing skittish.

A recent survey by Bank of America found 57 per cent of money managers in the high-yield bond market are holding above-normal cash levels, the most since the survey started asking about cash levels in 2011. Another survey, by Absolute Strategy Research, found that big asset managers see a 52-per-cent chance of a global recession over the coming year, the highest level of pessimism since the survey began in 2014.

But while the market is growing more cautious, it is still far from capitulation. In Canada and the United States, major stock-market indexes continue to hover near record highs. The IPO market may be struggling, but is nowhere near dead. Some recent IPOs – notably, Beyond Meat Inc. and Pinterest Inc. – have delivered good returns to early backers.

High-yield bonds are also delivering an ambiguous message. The spread in interest rates between these riskier bonds and super-safe U.S. Treasuries has historically been a good gauge of financial stress. If the gap is widening, it indicates borrowers are growing more nervous and demanding an extra buffer of protection against calamity. Right now, the spread is bigger than it was in 2017 and early 2018, but less than at many points over the past year.

One way to explain this mixed picture is that asset managers are just as uncertain as any Mom-and-Pop investor. At a time when the biggest risks are more political than economic, this uncertainty is rational. Until we know how the U.S.-China tariff war, Brexit and the U.S. impeachment drama will shake out, it is difficult to have much conviction about what lies ahead.

Some wonky signals, such as the yield curve, a measure of bond market sentiment, are signalling a high chance of recession over the next year. Surveys of purchasing managers around the world indicate factories in Germany are already in a recession, while those in many other countries are struggling.

On the other hand, low unemployment levels in Canada and the U.S. offer reason for hope. So do interest-rate cuts by several key central banks, notably the U.S. Federal Reserve.

The Citigroup Economic Surprise Index, a measure of how economic data compare to forecasts, has turned positive, indicating that readings are coming in better than expected. An even wonkier indicator, the excess bond premium, a measure of risk appetite in the U.S. corporate bond market, shows recession risk has actually been falling in recent months.

The recent turnaway from high-profile IPOs and other more speculative investments may actually turn out to be a positive sign for markets. It suggests investors are taking rational steps to prepare themselves for whatever comes. At the very least, this should reduce the pain if things don’t turn out well.

Of course, if you’re a marijuana investor, an Uber shareholder or a bitcoin enthusiast, the pain is already here. Don’t count on relief any time soon.

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