The markets get it right more often than you think

IT seems that a week – or even a day – doesn’t go by without an article story or research report asserting that investors are ignoring a huge risk or potential black swan in the markets. In recent years, there have been warnings about higher than average valuations, falling rates, rising rates, demographics, peak profit margins, China’s hard landing, Brexit, double-dip recessions, debt ceilings, margin debt, money printing, elections and much more.

Investors tend to be a confident bunch. No matter what happens or is expected to happen in the markets, economy or geopolitics, the majority of market participants assume that they will be the ones to profit, yet simple math says this will never be the case. Investors would be wise to understand who is on the other side of their trades. Although it’s easy to assume we can handicap everything that’s going on in the markets, we should approach them with a humble attitude.