The Efficient Market Hypothesis holds that asset prices reflect all available information at any given time. As a result, it is not possible to beat the market average on a risk-adjusted basis over the long term. Contrarians argue that temporary mispricing upends this theory, which does not take into account behavioural biases such as greed, fear, or herd behaviour.
There have now been three game-changing wars within the last four years. The instruction for individuals in Gulf states to ‘shelter at home’, and with no commercial flights carving their vapour trails across the skies of the European, African and Asian juncture, there is also an echo of the Covid years. The worry and dismay humankind feels at such threat is robotically equalled in the sentiment of investment markets, and it matters not how much moola is slopping around in institutions, funds and those made rich from the extraordinary run in stock markets, war brings a whiff of nihilism.
The best way to describe the month of February from the perspective of market performance is to resort to irritating clichés. Uncertainty prevailed, chiefly because of the mercurial US President. The number of ‘known unknowns’ remained elevated, the most salient of which were geopolitics and tariffs. The sum of the parts is far from equal to the whole, another way of saying that current oil price levels do not align with the forecast global supply, demand balance. Translating all of the above into the language of monthly returns, global equities edged higher.
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