Insights and Strategies
Lies, Damned Lies, and Statistics
Mark Twain popularized the phrase “lies, damned lies, and statistics”, referring to figures that would beguile him. Within that same spirit, as investors, we must resist the lure of putting too much weight on individual data points, that can be very valid in their own right, but might also lead to unwarranted conclusions without considering the broader picture or at least corroborating data. Last month, markets reacted negatively to a number of factors, including a U.S. July unemployment reading that triggered the Sahm rule, quickly spreading fears of a recession starting. Even the rule’s creator, Claudia Sahm, tried to put context to (downplay) the predictive power of this statistic. Following a quick pullback and recovery in the market we think it is important to emphasize that relying on a single data point can be misleading. It's crucial to consider the broader picture utilizing multiple indicators from different aspects before drawing conclusions and making investment decisions.