Our industry back tracks market moves liaising random patterns to find credible justifications but the financial market is ultimately unpredictable.
The problem comes when we assume that our perspectives are universal and when we think the financial eco system as coherent.
Unexpected events seem much more likely in retrospect but hard to predict, especially when a widespread market belief produces a strong consensus.
Until a distinct awareness of the unpredictability of the market is gained, we are unconsciously ruled by our inclination to overestimate our knowledge and ability to predict on a significant scale. The higher the over-confidence, the wider the gap between what people know and what they think they know.
We work within our circle of competencies, minimising exposure to what goes beyond our real understanding.
When dealing with investors based in stagnant economies or industry sectors with limited new wealth creation, we respect their tendency to prefer avoiding loss.
Individuals often fall victim to lack of rationality: when deprived of an option we suddenly deem it more attractive; a typical response to scarcity is a lapse in clear thinking. We limit our natural inclination to emotional reaction.