A difficult market to grapple with

Anyone else in the same boat? 

I'm going to do something a little differently today. Instead of writing this article to tell you about something - to share my understanding or some "worldly knowledge" about markets & investing, I'm going to write an article about how confused I have been about financial markets, particularly in recent times.  

I often get asked the question, "What do you think about the markets right now?".

And my answer to that question right now would simply be, "Well, it's definitely looking expensive right now". 

But, immediately after that response comes a heavy silence, and the wheels of my thoughts gets stuck in a metaphoric puddle of thick mud. 

The market (and world) as we know it today, can feel incredibly overwhelming - given the amount of newsflow coming out left, right and centre. 

And over my decade of being a participant or observer of the markets, I have well and truly found this to be the hardest market to narrate or cover. 

The focal point rotates weekly: bonds one week, the yen another, Iran over the first weekend of September, AI whenever the next announcement lands - and facts are paired off into contradictions that somehow hold together at the same time.

The one thing I know

It's expensive. 

This answer of mine is a well-measured response, one that we had measured across nearly 300 ASX stocks over August alone. The conclusion being that 16.5% of all our ratings were "BUY", compared against a roughly 40% a year ago, and nearly half the coverage rated SELL, with a median expected return of -21%. 

I published the five ideas that survived that screen here on Livewire recently, and even then,   three of those five ideas lean on an argument about where the discount rate will settle. So, this one confident response I own still comes with a conditional clause attached.

For that, you sort of need a narrative about the world currently, and this is where I will openly admit something that analysts and market commentators probably don't/aren't supposed to admit. 

I just can't get the story to hold still long enough to form a cohesive picture. 

A different explanation every week

• In late August the story was the yen: the US and Japan jointly intervened to support it, which the US almost never does, and every asset was briefly a carry-trade question. 
• The first week of September the story was bonds: our 10-year passed 5.19%, its highest since 2011, the papers called it a once-in-a-generation event, and every asset was briefly a duration question. 
• That same week the national accounts printed labour productivity at 0.0% for the quarter, and for about a day every asset was a productivity question. 
• Then, over the first weekend of September, the US struck Iranian tankers, Iran declared a restricted zone beyond the Strait of Hormuz, Brent touched US$97 - up 10% in a month, and suddenly every asset is an oil question. 

Next week, it will probably be some AI-related news break, or a central bank move, with markets already pricing in an imminent Fed rate hike after stronger-than-expected US jobs data.

And then, the wheel will turn again.

Facts that refuse to agree with each other

Essentially, greed assets at their highs, with volatility asleep. 

Both prices are forecasts trying to forecast for the same future, something I struggle to comprehend, and yet there they are, set by the same investors, at the same time. All the while, a shooting war unfolds around the world's most important oil strait.

Read the other way, there is no market left at all. 

I genuinely do not know which reading is correct, and the fact that both angles are available, is the point of contention.

In August, two governments intervened to prop up the yen, and in the same month, Japanese investors bought more than 5 trillion yen of foreign assets in a single fortnight. The state pushing one direction, its own citizens' savings flowing the other.

On the AI front, four American companies plan to spend more than US$700bn in this year alone, up 77% on last year, to build infrastructure for a productivity revolution. 

The same week those plans firmed, Australia's national accounts measured productivity growth at zero, with GDP per person still below where it sat in June 2022 after ten declines in sixteen quarters - with this trend likely to continue on in the near-future. 

Perhaps the revolution simply has not reached the statistics yet. Perhaps it will not. Both cases are argued daily.

And closer to home, my state's budget projects net debt near A$200bn by 2030 and claims Victoria's first surplus in seven years, in the same document.

Melbourne dwelling values fell 4.7% over the past year while Perth, Adelaide and Brisbane rose. The housing market is also telling two opposite stories depending on which airport you land at. 

Credit card balances sit below their 2018 peak, so by that measure households are deleveraging, while monthly card spending runs at record highs - A$40bn in June alone. 

And inside our own coverage, while the aggregate consumer is described as being on his knees, a youth fashion retailer (Universal Store [ASX:UNI]) is growing its second store format at 40%.

Even the machine shrugs

When I ask it about the macro picture it returns, in effect, what I opened with - it's expensive, followed by a very well-organised shrug.

The part where knowing more stopped helping

An investor who checks their portfolio once a month has experienced 2026 as: gold up 23%, the index near record highs, a couple of scary headlines that passed - including a 7.8% ASX drawdown in March that fully recovered. 

I have experienced the same destination, plus every rotation of the wheel in between, plus several hundred valuations, and I cannot honestly claim the additional information has produced a clearer picture.

Ignorance might genuinely be bliss here - or the once-a-month investor might simply be right, and the daily watcher is the one mispricing the noise.

It is just an accurate description of what covering this market feels like right now, and I believe that pretending otherwise, is an option that doesn't acknowledge the matters at hand, and ultimately, the less professional one.

So, where to from here?

I know I've struggled to synthesise what is happening in markets right now.

So, if you hold a framework that accommodates gold at records, equities at records, bond yields at 15-year highs, US$700bn of AI capex against zero measured productivity, and a VIX at 15 while tankers burn near Hormuz - all at once - I would sincerely like to hear about it (in the comments). 

Is anyone else in the same boat?

Otherwise, the most apt decision I can come to right now, is just deciding not to fully participate in the current shenanigans. 

That might be just sizing positions smaller, or holding true to your process in spite of the noise, and admitting you cannot see the whole board.