Very negative pictures can be painted on the outcomes of the European sovereign debt crisis. Other negatives can point to more deteriorating factors in the United States, such as the weak housing market and the high unemployment rate. In our view, all of these factors are known. They have been established for some time. They have been mixed into the pricing expectations in markets. In essence, they are “old news”.
via US Stock Market: Bulls vs. Bears; Historians vs. Risk Takers? | The Big Picture.
I have heard this often of late: “all of these risks are already priced into the market”. Isn’t that the same old Efficient Market Hypothesis that failed so spectacularly? The market will price the risk, but there is no guarantee that the risk is correctly calculated. Look no further than June 2007 to May 2008 for an example of how the market priced risk at the start of the sub-prime crisis.
“The market will price the risk, but there is no guarantee that the risk is correctly calculated.”
Oh, I am finding it hard to put into words how great I find this statement. Well put!
You hear this “the market had already taken that into account” or “that was already priced in” so often when commentators are trying to explain a move / or lack thereof.