Less Dumb Investing

There is an excellent article posted in the Wall Street Journal today, written by Spencer Jakab. I’ve taken the parts I liked and rewrote them below for those who don’t have a Journal subscription, but you really should just read the article in the journal itself if you have access.

The market rallied early one morning in 1998 for reasons no one could explain or predict. That was the premise of a fake—but sharp—Wall Street Journal parody from The Weekly Standard, and it still holds up today. In 2025, markets have behaved in much the same way: few saw it coming, and even fewer can explain it with a straight face.

Back then, the satirical article joked that analysts were crediting everything from the Senegalese money supply to tuna hauls in Peru. The absurdity landed because it exposed something real—most market explanations are little more than guesswork dressed up in confidence.

Sure, sometimes there’s a clear driver: a big earnings miss, a surprise economic print. But even those days can unfold in completely unexpected ways. And when you zoom out to months or quarters, the explanations get even shakier. Remember, in both 2007 and 2008, we had multi-month double-digit rallies after it was obvious the housing market was imploding.

Of course, the longer the time horizon, the easier it is to spin a narrative. When the market rises in the face of bad news, it’s “climbing a wall of worry.” When it stalls despite great earnings, it’s “consolidating.” It all sounds good after the fact.

This year has been particularly challenging for forecasters. Stocks started the year strong, riding the momentum of a so-called “Trump trade” based on hopes of business-friendly policy. Then came a near-bear market plunge after “Liberation Day” tariffs blindsided the market.

Those tariffs—especially the ones already in place—are now the steepest since the 1930s. Even if the worst of them are delayed again, they’ve already caused damage. Economists surveyed by the Journal have raised the odds of a recession to 33%, up from 22% at the start of the year. Corporate earnings expectations are down 3% since then.

And the S&P 500? It’s up 7% on the year—and 27% off the April lows, making it one of the fastest rallies on record.

But for some reason, people expect strategists to nail quarterly stock performance. Ironically, long-term projections—over 10 years—can actually be fairly reasonable. But short-term market calls are just noise and emotion pretending to be insight.