With equity market indices at or near all-time highs, it is imperative to ask the question- Where next? A reality check begs us to understand that financial markets have never been in a similar historical situation i.e accounting for modern economic principles such as quantitative easing which has had a significant impact (if not complete) on the direction in which equity markets have headed (so far).
As I observe the markets; the one word which comes to my mind is “Uncertainty” quickly followed by the question-how does one navigate this uncertainty? For reasons unknown(and you will find this frequently in my posts), I am drawing some insight from “Heisenberg’s Uncertainty Principle” to navigate our current markets.
The more precisely the position is determined, the less precisely the momentum is known in this instant, and vice versa.
–Heisenberg, uncertainty paper, 1927
Translating the above to markets, we can say it all begins with the psychological acceptance that “uncertainty” is inherit in nature…and should be an acceptable statement to those who have traded/invested for a good period of time.
In our case, uncertainty pertains to timing the market with respect to change in trend (momentum), which is again complex-ed by the time-frame the individual chooses to base his/her decision to buy or sell. Hence, certainty to one person may seem uncertain to another and vice versa.
I’ll leave it to the readers certainty to make what they think of my brief pondering on financial markets and Heisenberg’s uncertanity.