The only thing wrong with this Wall Street Journal headline is that it doesn't say "Investors Are Almost Always Wrong," full stop.
My keen observation about investors is that they think (a) whatever is happening now will keep happening, and (b) high things will come down and low things will go up.
Of course, they're not always wrong. Starting in 2009, for example, they predicted in every single quarter that the Fed would raise rates. In 2016 they were finally right! Stopped clocks and all that.
"Starting in 2009, for example, they predicted in every single quarter that the Fed would raise rates. In 2016 they were finally right! Stopped clocks and all that."
And some day, there will be a recession. Just like you keep predicting...
Yeah, I think this is a bad example actually.
It's not like any of them could predict the Fed would lower raise, because of the zero lower bound. So given that rates could only move in one direction, *of course* some subset of market bets were going to be that there'd be some movement upwards. Even if it's a low percentage play, it's probably only part of a broader betting strategy.
People don’t beat the market. But the good news is that index funds make it easy to follow the market.
I do wonder about venture capital which gets in before the market.
Right! I've become a huge fan of indexing. Fidelity did some research as to which group of investors did best in their funds - turned out it was dead people. Followed by people who forgot the owned the fund. So, the lesson there is that people don't beat the market. Start young, buy index funds, hold them, reinvest the dividends, keep contributing.
Sorta like people predicting a recession from the Fed rate shooting up?
Here's something I think I know about the stock market. It will overshoot.
(b) contradicts (a).
I'm shocked the WSJ produced a useful graph.
I wonder if all those predictions of rate increases between 2008 and 2016 were because a Dem was President and the investors figured the Fed would raise rates to damage their political standing.
You gotta love the prediction that they would raise rates in the middle of a recession.
You are reading it wrong.
For example, right now, the market thinks there is an 18.0% chance of a cut.
And a couple of months out, there is even a greater chance for a cut.
But that is like predicting where the stock market will be in a few months, or the weather will be in a few months.
You have a generally idea but you are rarely correct.
So, if the rate is NOT cut on March 31, does it make sense to claim the market predicted a 4.5bp cut that didn't take place? If they don't cut then the market made a pretty decent prediction.
Predictions are hard, especially about the future. There is a ton of money to be made if you can predict interest rates better than the market.
My keen observation about investors is that they think (a) increases in their portfolio values is because of their wicked stock-picking skills, and (b) losses are due to policy failures by the Fed and Democrats.