Do the "Experts" Know Better?
Everyone I know tells me that interest rates will probably head up this year. A measure of just how skewed market opinion on interest rates is comes from an article I saw recently, citing results of a survey of financial market professionals who watch, analyze and forecast interest rates. Some 46 out of 47 of these so-called "experts" indicate that interest rates will rise this year. The article also mentioned that these experts as a group have a very poor track record over the past 20 years, being right far less than half the time.
From a contrarian point of view, when such an overwhelming consensus develops in one direction, the best thing to do is to run the opposite way: When consensus says interest rates are rising, they will most likely fall. I am not necessarily a contrarian but I think that there is some merit to reversion-to-the-mean theories of human behavior. When investors and traders all sell Treasuries based on predictions of rising interest rates, there comes a point when there is nobody left to sell. At such a time, the markets rise and interest rates fall.
Interestingly, we may be in this situation today. In my opinion, the stock market looks oversold and interest rates could have further to fall.