Why is the Market Not Trading on Fundamentals Lately?
If the conventional macroeconomic approach is useless even in retrospect, if it cannot explain or understand an outcome when we know what it is, has it a prayer of doing so when the goal is assessing the future?”
So, when you see with your own eyes that the market is not trading on fundamentals, why would you consider that fundamentals ever control the market? Do you even consider that fundamentals really don’t drive the market?
Recognize that when the market finally begins to trade in the direction suggested by fundamentals, the fundamentals then are really a coincidental factor, rather than a controlling one. Otherwise, you have to believe that fundamentals only control the market “some of the time.” Does that really make sense? Do you control the action of your arm only some of the time? Either you control your arm or you don’t. Either someone is pregnant, or they are not. There is no such thing as a little pregnant.
To believe otherwise is to suspend reason and logic for the sake of clinging to an outdated market perspective simply because it is commonly accepted. So, consider how you did when you adopted the commonly accepted perspective about the market for Brexit, Frexit, terrorist attacks, interest rate hikes, cessation of QE, Trump’s election, etc.? Remember, the world was once commonly accepted to be flat too.
“In the dark ages, the world was supposed to be flat. We persist in perpetuating similar delusions.”
—R. N. Elliott, Natures Law, 1946
Over the past week, the market has provided us with a very overlapping structure that does not provide much in the way of a high probability very short-term expectation.