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Markets don’t actually hate uncertainty: Morning Brief

Sam Ro
·Managing Editor
·4 min read

Tuesday, October 20, 2020

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Hate it or love it, uncertainty is an everyday part of investing

“Markets hate uncertainty” is a weird cliche that gets thrown around a lot without much value-adding context.

We’re hearing it a lot more with the election nearing and a contested outcome being a baseline scenario.

Sure, the market reacts to changes in uncertainty. When uncertainty rises, all other things being equal, you can expect stock prices to be lower. That’s simply because the murkier the outlook, the bigger the discount investors demand.

But “hate” or “doesn’t like” is not the right way to characterize how investors feel about uncertainty. Because for as many shares sold by people fleeing, there are as many being bought by those seeing an opportunity.

Another way to look at all of this is if the sense of “certainty” is high, then you probably won’t be getting much of a deal on that stock price.

“It is often said that ‘the market doesn’t like uncertainty,’” Oppenheimer’s John Stoltzfus said in a note to clients on Monday. “Often when we hear that we think to ourselves: ‘Really?’ In our experience opportunity often arises from uncertainty while a perception of ‘certainty’ often breeds complacency.”

History’s greatest investor Warren Buffett had his own way of saying this: “A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.“

People like Buffett who have cash to invest arguably love uncertainty because of the buying opportunities it presents.

This isn’t exactly a new investment principle. But it’s easy to forget when you have money in the market and news headlines are riddled with what appear to be unprecedented uncertainties.

The truth is there will always be something that’ll make you feel uncertain and uncomfortable about putting money into the stock market. Just take one look at the Morning Brief’s chart of the decade.

So, if you’ve been waiting for “certainty” to put your money in the stock market, then you’ve probably missed most of the last 100 years of gains.

By Sam Ro, managing editor. Follow him at @SamRo

What to watch today

Economy

  • 8:30 a.m. ET: Building permits, September (1.520 million expected, 1.476 million in August)

  • 8:30 a.m. ET: Housing starts, September (1.465 million expected, 1.416 million in August)

Earnings

Pre-market

  • 6:30 a.m. ET: Synchrony Financial (SYF) is expected to report adjusted earnings of 74 cents per share on revenue of $2.75 billion

  • 7:00 a.m. ET: Procter & Gamble (PG) is expected to report adjusted earnings of $1.42 per share on revenue of $18.4 billion

  • 7:00 a.m. ET: Phillip Morris International (PM) is expected to report adjusted earnings of $1.37 per share on revenue of $7.32 billion

  • 7:30 a.m. ET: Albertsons (ACI) is expected to report adjusted earnings of 25 cents per share on revenue of $15.48 billion

  • 7:30 a.m. ET: Lockheed Martin (LMT) is expected to report adjusted earnings of $6.10 per share on revenue of $16.11 billion

Post-market

  • 4:00 p.m. ET: Netflix (NFLX) is expected to report adjusted earnings of $2.37 per share on revenue of $6.39 billion

  • 4:00 p.m. ET: Texas Instruments (TXN) is expected to report adjusted earnings of $1.28 per share on revenue of $3.45 billion

  • 4:10 p.m. ET: Snap (SNAP) is expected to report an adjusted loss of 5 cents per share on revenue of $558.15 million

Top News

Markets tick lower with mounting COVID-19 cases and US stimulus impasse [Yahoo Finance UK]

Intel agrees to sell storage unit to SK Hynix for $9 billion [Bloomberg]

Moderna CEO expects COVID-19 vaccine interim results in Nov: WSJ [Reuters]

UK launches world's first human challenge trial for COVID-19 with Irish company hVivo [Yahoo Finance]

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