The Efficient Market Theory states that it is impossible to “beat the market” because share prices always incorporate and reflect all relevant information as soon as it becomes available. Implicit in this theory is the condition that all market participants receive and act on all relevant information at the same time. Of course, this notion is silly and is not true.
The reality is that market participants certainly would like to be among the first to receive all relevant information, but only a few have the wherewithal to do it. The Pros and high frequency traders can do it, but most of us are among the last to hear any market moving news until it’s old hat. So how can we deal with this disadvantage?
We have to focus on the primary forces driving the market and not get bogged down or misdirected by useless headlines. That’s why I wrote about our Investment Climate Report and S&P 500 Earnings Trend Indicator last week.