Knee Jerk Reaction

I have come to realise that the majority of people, even those with the knowledge to act differently, seem to act in the same way when we are confronted with certain circumstances.

I must confess this 1 dimensional thinking irritates me in its simplistic understanding of the complexity of the stock market. Let me explain what I mean.

You will find that around specific news events many people and I have one particular fund manager in mind when I write this will think that if the FOMC is about to announce a rate decision tomorrow they will wait until tomorrow and then place their trade on, in the expectation that the market will then go up if it is a rate cut or go down if it is a rate hike. The statistics will tell us the market behaves very noisily around news events which means the behaviour is typically random, and of course the market has long been discounted what the news event is likely to produce.

It therefore irks me when people say I am waiting to buy the market after the cut tomorrow. We have been witness to an increasing amount of market behaviour that has been contrary to these news events, such as major stimulus injection announcements and rate cuts, etc.