Market Outlook and Predictions
Blog post
03/05/25I am sitting on the floor of my den about to play PrettyPretty Princess with my 3-year-old daughter. If you have never played this game, you take turns spinning an oversized spinner trying to be the first player to collect the complete set of undersized plastic jewelry. If you can achieve this first, you are the PrettyPretty Princess (a feat that is elusive in my household).
While the rules are straightforward, my daughter’s rules are also straightforward: When it is her turn, she always gets a 3 (because she likes that number) even though she rarely moves the spinner to 3. More importantly, a 3 means she moves her pawn to whatever piece of jewelry she has her eye on. (This would be a suitable time to teach a lesson about rules, but every piece elicits pure joy, and I am not a monster). She can be shrewd, but she is also a sweetheart because when the spinner tells me I must put a piece back, she will not let me.
Lastly, her final rule change is she does not need the crown to win (because it is flimsy, and she does not like how it fits). Overall, her rules shorten the game, but inevitably she is crowned the PrettyPretty Princess.
Making financial predictions and market outlooks is much like playing PrettyPretty princess with my daughter. You are going to be wrong, and you are going to look silly in the process, so you’d better not get too emotional or put too much at risk.
People all too often consider financial markets a science. That is a misconception. Yes, there are scientific principles and mathematics applied, but they are far from concrete. It is more abstract. Markets are driven by humans in the real world, who are not always rational, which leads to an unpredictable world. This is then magnified due to the interconnectedness of markets.
At THOR, instead of crafting a market outlook that drives portfolio construction, we have a disciplined process that drives our decision making. We are not market timers. We do not try to predict what will happen. Instead, we take what the market gives us, and we construct portfolios for the long term with risk and reward in mind.
We know that managing money is both an art and a science. The science is our process and the principles that make up that process like diversification, reversion to the mean, sentiment, and valuation. The art is applying that process in an uncertain world. Many times, our indicators fit a narrative that we are comfortable espousing, but that is the order in which we work, not the reverse.
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