Predicting where the stock market will go is futile

Good perspective on how to view the stock market from Vitaliy Katsenelson. This was written a few weeks ago after the “correction” early in February:

Nobody but nobody knows what the stock market will do tomorrow, next week or next year. Stock market behavior in the short term is completely random. Completely! You’ll have a better luck predicting the next card at a black jack table than guessing what the stock market will do next.

What will the stock market do next? It’s the wrong question. It’s the question that should never be asked, and if asked should never be answered. Asking this question shows that you believe there is some kind of order to this random madness. There is not. And if you answer with any answer other than “I don’t know,” you’re a liar.

via What will the stock market do next? at Vitaliy Katsenelson Contrarian Edge

On the benefits of trend following investing

The consistency of a trend following strategy’s relative performance vs a 60/40 portfolio (impacting the ability for investors to stick with trend following) is the basis of an argument that’s taken place offline (yes, I also argue offline) with a FinTwit friend who is a huge proponent of buy and hold. It’s progressed to the point that we’ve discussed making a mini (very mini) Buffett style bet related to whether trend following or a 60% US Stock / 40% Bond allocation will outperform over the next five years (with money going to the winner’s charity of choice).

via The Behavioral and Performance Benefits of Trend Following at

Value index funds have underallocated tech

Michael Batnick looks at why value indexes have performed poorly over the last decade and finds a simple explanation, essentially it’s an allocation issue.

Value has 23% more exposure to financials and 29% less exposure to tech. This is the primary driver of the gap in performance over the last ten years. Over this time, tech stocks have gained 255% while financials have gained just 61%!


via What’s Wrong With Value? at The Irrelevant Investor

Momentum works because it’s the natural evolution of creative destruction

momentum works for a fundamental reason – it’s the natural evolution of creative destruction. You could say that all market cap weighted index funds are momentum funds because they more or less reflect the process by which corporations succeed and fail.

via Why Does Momentum Investing Work? – Pragmatic Capitalism at Pragmatic Capitalism