There is a persistent myth on Wall Street that some people can predict the twists and turns in the market with a high degree of accuracy. The reality is that no one has ever been able to consistently predict market action with great precision.
This myth exists because there is no clear line between luck and skill when it comes to market prediction. If you make enough predictions, you will be right… sometimes. The bad calls are forgotten, and the good calls are celebrated as a product of superior insight, skill, and knowledge. There are a number of market pundits that have made a career from one good call that was just lucky timing.
Market predictions are the primary product of the business media. There is endless discussion about whether this is a bull or bear market and what will happen next. Everyone is searching for that special knowledge that will allow them to outsmart the market. This attracts readers and viewers that want to be told the future.
What market participants are really looking for is certainty. When you are sure, then decision-making is much easier. Howwever, the biggest thing that defines investing success is the willingness to adjust to ever-changing market conditions. As John Maynard Keynes is reported to have said: “When my information changes, I change my mind. What do you do?”
It is not essential to be bullish or bearish. We need to evaluate the risks and rewards of any investment strategy so we can take action. What is important is to constantly question your thinking, be ready to change your mind, and take the appropriate action when conditions change.
Recently many market players have been eager to predict a significant top. The folks holding some of the Fab Five AI winners scoff at this view of the market because they are looking at a totally different aspect than someone that primarily trades other stocks or sectors. Neither side is right or wrong. The market can be both bullish and bearish at the same time. However, the media insists on a shorthand way to characterize the entire market. That is why we constantly see the words ‘bullish’ and ‘bearish’ in the headlines.
If you have a strong opinion about the overall market, then it is essential to have a plan for changing your mind and reacting to shifting conditions. Don’t let ego or fear of making mistakes keep you clinging to your original view.
I embrace the view that no one knows where the market will be a year from now. I certainly hope it is in a roaring bull market, and I can come up with some good arguments why that should be the case, but I’m just guessing.
What will determine your level of success isn’t being bullish or bearish. What will control your destiny is how well you navigate through the many twists and turns that are sure to occur.
The words ‘bull’ and ‘bear’ are part of the market culture and will always be used to describe how someone approaches the market, but it is far better to think of yourself as an ‘opportunist.’ Whether the market is going up or down, your goal is always to be ready to seize the next opportunity that comes along.
Currently, the market is acting quite well, and the fact that the market ended January with gains bodes well for the reaminder of the year. However, your priorities should be managing the positions you currently have and looking for the best opportunities that develop as conditions evolve. Forget the bull and bear nonsense.
