Predicting unpredictable seems to be rather challenging near term - investors need to be flexible in
- Sergey Rumyantsev
- Oct 17, 2016
- 1 min read
Looking at the number of outcomes with uncertain probabilities but lasting impact on the market:
1. What if Clinton-Trump results are far from certain?
2. What if there is a military misstep in ME?
3. What if Europe is never getting out of deflation?
4. What happens after Fed rate hike with US equity multiples as markets have not seen non-zero rates for almost a decade?
Where would you invest if you don't have convictions over those and other questions? One should focus not on predicting specific outcomes but on screening for best risk-reward across multiple "what if scenarios" and define priorities (e.g. risk limits if worst scenarios happen, upside/downside optimization across averaged scenarios)
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