I’ve been thinking a lot about expectations lately. The ones we put on ourselves, the ones we put on others, and how quickly those expectations can frame our life stories. There is nothing more detrimental to our success than failing our own expectations of ourselves. Mostly because hope, greed and fear almost always lead us to false ones. Expect the best and plan for the worst is all well and good, but then even if you land on good, you’ve fallen short.
In life, a typical example is vacationing with children. You’ll hear people say they need a vacation from the vacation. Or perhaps the line “it’s a trip, not a vacation”. When an adult goes on a vacation, perhaps they dream of relaxation, visiting every hot spot, relaxing for drinks on the patio, they leave their work (if they can) behind. But a child still needs to eat, still gets overstimulated, still doesn't sit still at a restaurant, still needs to nap, still gets car sick, still wants another stuffed animal from the gift shop. Somehow, we expect that saying the word vacation means that everything else falls away, and we end up frustrated by others behaving the same way they’ve always behaved, the only thing that has shifted is our failed expectations, some of which we may not even realize we made.
When I look at the markets lately, I see a lot of varying opinions. Some people love to buy the dip, some people are frustrated by the grinding nature, or seemingly lack of opportunity in some names or some indices. I myself get frustrated by it as well, especially end of day options unwinding that has seemingly no bearing on the following day. Then I’ll look back on a day and think: this name moved 10% today, there was opportunity in several places, this is the volatility a 2017 trader would have dreamed of. We see moves in a single day or week that could be a years’ worth of movement in another market for another stock.
So, what could be some of our misappropriated expectations that are making us begrudge the market (from doing what it has always done no less - trying to frustrate traders)?
Perhaps patterns. Maybe more broadening wedges, more price action that quickly reverses rather than follows through. Perhaps V-shaped moves, only up or only down. Perhaps rotation, that the market indices don’t always follow the results of more stocks, or they disconnect. There are several expectations that we can unknowingly place on the market that frame our day from one of opportunity, to one of frustration. That strips us of our willingness to bend to the market's movements because we have some version in our head that is not playing out. It’s not a vacation. It’s a trip. Your kids still need to eat, the market makers still have to make money. The institutions still have to find a way to strengthen their bottom lines, and bring in more liquidity and volume.
