There is No Impossible in Markets

“Nothing is impossible. The word itself says ‘I’m possible’!” – Audrey Hepburn

Ireland’s 5-year bond yields are negative. In 2011 they were yielding over 17% and deemed a “dead cert for default.”


The 20-year bond yield in Switzerland is negative, as is the 10-year bond in Japan and the 9-year bond in Germany. Even Italian and Spanish bond yields have gone negative up to three years.


If someone said five years ago that we’d be looking at negative yields across most of the developed world, they would have been laughed out of the room. None of this was expected or predictable. And yet, here we are.

That is the nature of markets. They are constantly testing our accepted notions of what is normal and what is possible.

A few examples from recent years:

  • The Federal Reserve cut interest rates to 0% (a record low) in December 2008 and held them there for 7 years. Prior to this, the Fed had never held rates at a trough level after a recession for more than 16 months (September 1992 to January 1994 was the prior record).
  • The S&P 500 remained above its 200-day moving average for 475 trading days from November 2012 through October 2014 (“The Streak”). The prior record was 385 trading days in 1995-96.
  • Crude Oil was below its 200-day moving average for 427 trading days from July 2014 through April of this year (“The Longest Downtrend in Crude Oil History is Over”). The prior record was 279 trading days in 1993-94.
  • The Volatility of Volatility Index hit an all-time high in August 2015 as the VIX Index spiked 213% in five trading days (from 13 to over 40), the largest 5-day spike in history (#2 was in August 2011 at 103%). (“May you live in volatility times.”)
  • The U.S. Dollar Index advancing 25% over 9 consecutive up months from July 2014 through March 2015 (prior record was 6 consecutive up months).

This is but a small sample. I could fill a book with market movements throughout history that challenged all predictions and statistical probabilities.

With hindsight bias we view these events, including negative interest rates, as predictable, when in reality they were anything but. As time passes, they almost seem normal as our definition of normal itself is constantly changing and altered most by recent history.

The challenge for traders and investors is to learn to operate and profit within this inherently unpredictable system. This is no easy task as it requires a suspension of disbelief at times and giving up on the idea that markets will follow a normal, predictable or desired path. It also requires self-control as we are inclined to take extreme action in portfolios when we see extreme events. Needless to say, emotionally-driven action is rarely a good thing in investing.

As I write, interest rates are hitting new historic lows around the developed world. Where will they stop and what will be the long-term ramifications of this grand central bank experiment? Nobody knows.

The only thing we know for sure is that there is no impossible in markets. Time will make a fool out of anyone who believes otherwise. It has certainly done so to me in the past.

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This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.



Charlie Bilello is the Director of Research at Pension Partners, LLC, an investment advisor that manages mutual funds and separate accounts.  He is the co-author of four award-winning research papers on market anomalies and investing. Mr. Bilello is responsible for strategy development, investment research and communicating the firm’s investment themes and portfolio positioning to clients. Prior to joining Pension Partners, he was the Managing Member of Momentum Global Advisors previously held positions as a Credit, Equity and Hedge Fund Analyst at billion dollar alternative investment firms.

Mr. Bilello holds a J.D. and M.B.A. in Finance and Accounting from Fordham University and a B.A. in Economics from Binghamton University. He is a Chartered Market Technician (CMT) and a Member of the Market Technicians Association. Mr. Bilello also holds the Certified Public Accountant (CPA) certificate.

You can follow Charlie on twitter here.


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