The Investment Scientist

On The Unpredictability of The Market

Posted on: September 19, 2016

101564731_stock-market-flag_MONEY-large_trans++qVzuuqpFlyLIwiB6NTmJwZO0xduNqJuDe2sa-SviKa0.jpg

At the end of June this year, UK citizens voted in a referendum for the nation to withdraw from the European Union. The result, which defied the expectations of many, led to market volatility as participants weighed possible consequences.

Journalists responded by using the results to craft dramatic headlines and stories. The Washington Post said the vote had “escalated the risk of global recession, plunged financial markets into free fall, and tested the strength of safeguards since the last downturn seven years ago.” The Financial Times said “Brexit” had the makings of a global crisis. “[This]represents a wider threat to the global economy and the broader international political system,” the paper said. “The consequences will be felt across the world.”

What about those self-proclaimed financial gurus? Motley Fool wrote: “Sell Everything! How Brexit Can Shatter Share Market” and Jim Cramer wrote: “Don’t Buy! Why the Mass Brexit Sell Off is Worth Riding Out.”

It turned out there was no “mass brexit sell off.”

It’s true UK got a new Prime Minister, and the Pound Sterling fell to 35 years low. But within a few weeks of the UK vote, Britain’s top share index, the FTSE 100, hit 11-month highs. By mid-July, the US S&P 500 and Dow Jones Industrial Average had risen to record highs. Shares in Europe and Asia also strengthened after dipping initially following the vote.

Before Brexit faded away in our memory, what can we learn from this experience? I don’t know about you, here is what I learn. We don’t know what gonna happen in the future, and we don’t know how the market gonna react. And those pundits on TV and newsletter don’t know either. Prudent investing aka wealth preservation should never be based on their (or our) speculation.

Schedule a Discovery review with me, or get my white paper for free: The Informed Investor: 5 Key Concepts for Financial Success.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Author

Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC. He is also a regular contributor to Morningstar Advisor and Physicians Practice. To explore a long-term wealth advisory relationship, schedule a discovery meeting (phone call) with him.



You may also get his monthly newsletter, or join his Facebook page for regular wealth management insights. Michael's email is info[at]mzcap.com.

Twitter: @mzhuang

Error: Twitter did not respond. Please wait a few minutes and refresh this page.

Archives

%d bloggers like this: