One of the more interesting aspects of the market in 2014 is how much it has managed to defy expectations. Consensus has been consistently wrong; indeed, it seems that any time there is an agreement of sorts on just about any issue, the opposite has happened.
Merrill Lynch’s legendary strategist Bob Farrell put together "10 Rules for Investing," and rule No. 9 states that “When all the experts and forecasts agree — something else is going to happen.” That certainly seems to be the case so far this year.
Consider the following cherry-picked anecdotes in support of Farrell’s dictum:
No. 1. Rising-rate environment. It seemed like all any investing year-in-preview article could talk about was rising interest rates: “How to Adjust a Bond Portfolio in a Rising-Rate Environment,” “Investments To Watch In A Rising-rate Environment” and others graced my inbox the past month.
It was clear that rates had nowhere to go but up (didn’t they?).
The only problem was that we began the year with the 10-year Treasury at a bit higher than 3 percent, and its yield proceeded to fall to as low as 2.6 percent.
No. 2. Worst February start for stocks in 32 years. At least, that was what they were writing a week ago, after a loss of more than 300 points in the Dow Jones Industrial Average on Monday, Feb. 3. A weak bounce the next day emboldened bearish writers. But then the Dow had triple-digit gains on Feb. 6 and again the following day. In sum, after the worst start to the month of February -- is there even a February Barometer? -- the market finished the week with gains.
I was as bearish as one could be in 2007 and 2008, but markets were already wobbling. I can't imagine how punishing an environment this is to be a bear.
No. 3. Gold miners and Treasuries were the worst sectors in 2013. Treasuries had a dismal year in 2013, recording their third-biggest annual loss in four decades. Their saving grace was that they weren't gold-mining companies, whose stock prices were cut in half last year. Consensus was just as negative this year.
So how have these two done? In January 2014, Treasuries had big gains; the 20-year bond rose 7 percent. And gold miners jumped 17 percent.
We never know what the future holds. When all the experts agree about what is going to happen next, it might be fruitful to consider taking the other side of that trade.
(Barry Ritholtz writes about finance, the economy and the business world for Bloomberg View. Follow him on Twitter@Ritholtz.)
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