We’re a few weeks removed from Brexit and I think it’s safe to say the sky hasn’t fallen…yet.
I don’t have an opinion on the vote or the potential impact it might have either, but Jeremy Seigel did a podcast explaining much of it if you’re into that sort of thing.
The response to Brexit was a reminder to something that’s been playing out like a broken record since 2008 (since forever really).
Uncertainty brings volatility. Volatility brings fear. And the rest is history. Or not.
It turns out, that fear of a market crash is a poor predictor of crashes. When everyone is expecting the worst, the worst rarely happens. Go figure.
As is often the case, both investors and experts do a great job of manufacturing big events only to find out later it was no big deal.
It happens because there’s not enough information (thus the uncertainty) for the markets to come to a consensus about the future. So rather than wait for more facts, investors speculate – more than usual and negatively – about the future. That negative shift in sentiment takes care of the rest.
Sam Ro points this out in his piece this week, along with this bit of truth.
But investors should always remember that when it comes to risk in the markets, it’s always something. And oftentimes, bouts of uncertainty end up being uncomfortable buying opportunities that can pay off generously over time. That’s just the inconvenient truth about the stock market.
- Global Stock Market Valuation Update Through 6/16 – StarCapital
- Mental Models I Find Repeatedly Useful – Medium
- Take a Simple Idea and Take It Seriously – M. Housel
- The Values of Value Investing – Institutional Investor
- 25 Years of Learning and Laughter – B. Gates
- Corporate Executives Intentionally Mislead Investors for Personal Gain – Bloomberg
- We’re All Biased, but That Doesn’t Keep Us from Making Valid Decisions – Scientific American
- How ‘Advantage Players’ Game the Casinos – NY Times