Listen to this:
In the two days after the Nov. 8 election, 10-year yields rose 0.3 percentage point to 2.15 percent, adding to a weekly jump that was the largest since June 2013.
Today, yields jumped to 2.25 percent, while the 30-year bond yield surged past 3 percent for the first time since January.
Hardly anyone on Wall Street saw it coming. None of the 65 analysts surveyed by Bloomberg said 10-year yields would rise above 2 percent by year-end.
That’s from Bloomberg. It’s amazing. These are 65 people whose entire job revolves around understanding the bond market and having a good idea about where it’s going. And not one could do it. I almost don’t understand how this is even a thing. If you’d told me only half of the 65 analysts had higher rates as their base case, it would have been bad enough. But none? Come on!
But then I realize that no one is able to do this in any other aspect of investing anyway.
The odds assigned to a Trump victory around Wall Street were every bit as low as those of the professional pollsters.
And not only did they miss the winner of the election, they then got the investment market implications completely backwards. Stocks surged higher and real estate, gold and fixed income plunged. The exact opposite of the consensus expectation. It’s almost like they’re screwing these calls up on purpose.
But then the real F.U. – the cardinal sin of the forecasting class: They changed their sentiment immediately following the price action that flew in the face of earlier calls.
Those who were sounding notes of caution in the event of a Trump win have now embraced it. Obviously because the immediate reaction in the stock market forced them to. Nothing shifts sentiment like price. “It’s actually a good thing for the markets because ___ and ____.”
Below, one example of many…
Here’s Citigroup on August 25th:
The election of Donald Trump as President of the United States could lead to chaos in markets and increased policy uncertainty that tip the world into recession, according to Citigroup Inc.
“A Trump victory in particular could prolong and perhaps exacerbate policy uncertainty and deliver a shock (though perhaps short-lived) to financial markets,” writes a team led by Chief Economist Willem Buiter.
And here’s Citigroup today:
Citigroup Inc. views the 72-hour-old rotation into stocks following Donald Trump’s presidential victory as the start of something big.
Strategists led by Jeremy Hale raised the firm’s recommendation on global equities to overweight from underweight, meaning investors should hold more stocks relative to their benchmarks. They cut fixed income, saying government bonds and the credit market will underperform in the next 12 months.
To quote the Bobs from Office Space, what would you say…you do here?
And I don’t mean to pick on Citi. JPMorgan just did the same thing. I don’t have the time to track down every other example but I’ve seen like six of them over the weekend. A popular macro charlatan on Twitter was telling subscribers to flee equities and load up on bonds and gold ahead of the election. I can only imagine the destruction of wealth their “clients” are enduring over the last week as a result of this call. In the realm of advice, you get what you pay for. Free or nearly free advice is worth every penny it costs and not a penny more.
But there’s hope.
Because people are learning to ignore this stuff now. They’re not paying attention anymore and they’re certainly not allocating their assets based on it. The exodus toward systematic strategies or passive solutions is in direct response to the reliable uselessness of what was formerly considered the standard. In the olden days, you could make forecasts and calls all day long and then emphasize the ones you got right as marketing. The internet doesn’t allow that. People don’t need to have good memory, they only need the search box.
Tomorrow, we’re throwing what I consider to be the most important investing conference of the year here in NYC. We’ve got an all-star team coming to discuss Evidence-Based Investing, which is the future of the investment management industry. There will be no S&P 500 price targets or macroeconomic forecasts recited from the stage. No false certainty about the unknowable future. No table-pounding calls. No chickens playing bingo and no octopus picking World Cup winners.
Instead, we’ll be talking about how investors are using historical data and current trends to make intelligent decisions about their where to put their money. There’s no glory or ego involved. Just a healthy mixture of confidence, doubt, skepticism and self-awareness of our limited capacity to consistently guess at what’s about to happen. And the concomitant acceptance of the fact that knowing what’s about to happen is not necessary to produce good outcomes.
I’m beyond fired up for the show. There are only five seats left by the way. If you want to grab one of the last ones, the discount code is RWM25 to receive 25% off.
This is the future. The genie is out of the bottle and we’ve all seen too much to go back and believe in the old ways. And for those who persist in the Dark Ages-esque practice of year-end price targets and macro forecasting – despite all of the evidence pointing to the fact that it cannot be reliably done – I say We Got It From Here… Thank You 4 Your Service.