Video: The Wisdom of the Crowd Versus Conventional Wisdom
- The 'wisdom of the crowd' is more of a reflection on the collective prioritization and price setting
- 'Conventional wisdom' reflects on adages or observations that seem to arise out of repetition
- We review the accuracy in rate hikes in election cycles, 'sell in May', high risk-reward and ideal safe haven
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Societies build upon previous discoveries so that knowledge can be used to promote progress. However, the same altruistic 'common knowledge' does not hold for the markets. Conventional wisdom is a selection of loosely held observations and frequently assumed relationships that have dubious results when it comes to helping our trades. When it comes to situations where there is no clear answer and speculative appetite is driving the needle, conventional wisdom can often lead us to low probability scenarios. In today's Strategy Video, we separate the 'wisdom of the crowd' from 'conventional wisdom'. Then we review the wisdom in following commonly held beliefs/assumptions pertaining to rates in election cycles, seasonality conventions such as the 'sell in May and go away' adage, the belief that the risk-reward ratio the better the trade, and the premise that the Dollar and Gold are the best safe havens.
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