At the beginning of each year, investors find themselves deluged with an influx of economic and market outlooks. All too many of these commentaries merely parrot the consensus outlook, limiting the upside potential from trading on these calls; the stock market has usually priced in these widely held assumptions.
An analyst can be spot-on with his or her macro calls, but that’s of little value if this insight doesn’t generate trading ideas with meaningful upside.
Investors should always understand the consensus outlook and seek to identify areas where that view could prove to be overly optimistic or pessimistic. Identifying opportunities where the probability of a surprise skews the risk-reward proposition in your favor can lead to significant outperformance.
This article presents seven out-of-consensus views that we think have a 50-50 chance of occurring. Some of our predictions may prove to be incorrect, but we’re playing the odds here in an attempt to generate meaningful alpha.