Go to your favorite website, flip on the TV or radio, pick up a newspaper (!) and you will hear one word come up repeatedly: Uncertainty.
“There’s more uncertainty than ever.”
There is uncertainty everywhere!
There is a lot of uncertainty over the state of the stock market – Is the bear market over? Is this rally for real? How much worse can this get? What of earnings? Stocks are down, bonds are down, is there any place to hide?
So much market uncertainty…
What about this economy? It is so uncertain! Will we have a recession or are we in one now? If we are, how bad will it get? What about inflation: Is it transitory, have we peaked yet? Will it be sticky, pernicious, long-lasting? Will I lose my job?
Economic uncertainty abounds…
What about the Federal Reserve? Are they behind the curve, overly aggressive? Can they reel in inflation? Deliver a soft landing? Will they cause a recession? And what will happen with quantitative tightening?
So much confusion about monetary rates; so much uncertainty…
What’s happening with the midterm elections – are they really in play? What about abortion rights, contraception, marriage equality? Has the Supreme Court gone rogue? is Biden running in 2024? Who will his Veep choice be? Will Trump run? What’s up with the January 6th Committee? Will they refer the former president to Justice Department for indictment? What will happen with the war in Ukraine? Might it be over anytime soon?
All the best people are saying there is tremendous political uncertainty…
Here is the thing you need to know about uncertainty: It is always and forever exactly the same. The future is unknown and unknowable, inherently uncertain. You just refuse to acknowledge this, because that reality is pretty terrifying.
I can see you doubt this, so please consider last year, when everything was fine. In 2021, goes the counterargument, there was not a lot of uncertainty. Last year, you knew where you stood:
-Markets never closed less than 5% from all-time highs;
-The economy was so good everyone quit their jobs;
-President Biden passed a Covid bill AND a bipartisan Infrastructure bill.
Ahhh, ye good olde days.
Which raises an interesting question: If last year had so little uncertainty, where was the recognition of 2022’s issues? Why did no one see all of this mess coming?
Why, despite a lack of uncertainty last year, did you fail to anticipate the worst bond market in centuries? How did you not see the worst opening 6-months in the stock market in 40 years? The worst inflation since 1981? Q1 where stocks and bonds both fell double digits in the same quarter for the first time in 4 decades? WITH SO LITTLE UNCERTAINTY HOW DID YOU MISS THIS?!?
Because certainty, and its fearful corollary uncertainty, is nothing but a state of mind. Certainty is a level of comfort. It is an unjustified belief that you know what will happen, you have a good sense of the future, so it is easy to plan for what comes next, because of the lack of uncertainty.
Of course, this is a false belief, a completely misguided fallacy inherent to the species.
Your lack of uncertainty only means that you feel pretty good — comfortable and unthreatened enough to casually lie to yourself about how much you think you know. You can pretend you see what is coming because there is nothing to make you worry about it otherwise. When the stock market rallies 28%, you are optimistic about the future, extrapolating today out years or decades is easy.
Which turns out to be utter bullshit. You had no idea what was going to happen this year, DESPITE THE LACK OF UNCERTAINTY last year. You were comfortable in 2021 because nothing was rubbing your face in how little you actually knew about the future it – not the market, not the economy, not geopolitics. Despite this, you keep making forecasts; it’s a shame you are so terrible at it.
You know diddly squat, you just managed to forget how little you knew about the future. When your limbic system is not overly stimulated, when you can relax a bit . . . deep inhale . . . hold it . . . deep exhale . . . let it out . . . you can fool yourself into believing any form of nonsense. This is the normal state of human affairs.
But in 2022, you received no such quarter. This year kicked you in the teeth as it constantly reminds you haven’t the foggiest idea WTF comes next. It’s incredibly hard to pretend you knew when your portfolio is constantly reminding you of exactly little you did. Tough to pretend to be prescient when you become a prime candidate for this year’s Dunning Kruger award.
Off double digits, nothing is working and there is nowhere to hide? What happened to your 2021 flavor of certainty? How did you go from KNOWING what was going to happen to be UTTERLY CLUELESS?
Businessweek used to run an annual year in preview: All of the major Wall Street economists and strategists used to crunch the numbers and share their forecasts for where things would be a year hence: Stocks, bonds, the economy, inflation, GDP, employment, oil prices. The results were so consistently and hilariously wrong that eventually BW just stopped running it.
Economic and market forecasts tell us little about the economy or the market, but everything about the forecaster. The silver lining: When people are people are secure, unworried, well-fed, they don’t concern themselves with uncertainty. When they are uncomfortable with the present, nervous about the future, and genuinely frightened about their economic security, the uncertainty monster suddenly comes to visit.
This difference between certainty and uncertainty: It is not whether or not you know what is going to happen – you don’t know and never did. Your forecasting acumen between ‘21 and ’22 is unchanged; the only thing that is different is your ability to lie to yourself about it.
The future is unknown and unknowable; everything is inherently uncertain, and always has been. The only thing that changes from moment-to-moment is how your psyche processes this. 2022 has been an excellent reminder of this.
There Will Always Be Sorcerers (Dollars & Data, July 19, 2022)
“Uncertainty” Meme Refuses to Die . . . (May 20, 2016)
Revisiting the Uncertainty Trope (June 27, 2012)
Defining Risk Versus Uncertainty (December 10, 2012)
There’s nothing new about uncertainty (July 14, 2012)
Kiss Your Assets Goodbye When Certainty Reigns (November 9, 2010)
Apprenticed Investor: The Folly of Forecasting (June 7, 2005)