Once again, the markets prove that nobody knows nuthin’.
Following a bit of oil-driven turmoil the past few weeks, financial markets took off on Wednesday and Thursday. The Standard & Poor’s 500 Index had the biggest daily back-to-back gains since March 2009. Underinvested fund managers, short-sellers and even long-only, fully invested money managers worried that they didn’t have enough global equities.
Once again, Mr. Market has confounded so many of the world’s smartest investors.
Capital markets are thought of as a mechanism for buying and selling long-term debt or equity-backed securities, but that definition falls short. Mr. Market is a philosopher, a patient teacher to those who come to class aware of the wisdom on offer. The lessons for those who pay attention to this graduate-level philosophy class are rich, deep and highly counterintuitive.
As you read the many predictions for 2105, do you remember how many strategists were forecasting a collapse in crude oil prices at the start of the year? That’s right, precisely zero.
Recall the beginning of 2014, when 72 out of 72 economists were anticipating higher rates and lower bond prices. How did that work out?