Investing reacts to narrative not facts

 

And in economics as in other sciences, you cannot get away from the aesthetics of human stories. Or, as Damon Runyon put it: " 'I thank you, Herbie, just the same,' I say, 'but I must do without your tip,' and with this I start walking away. 'Now,' Herbie says, 'wait a minute. A story goes with it,' he says. Well, of course, this is a different matter entirely. "

- D McCloskey Scientific American February 1995 "Once Upon a Time There Was a Theory"

What is it that Wall Street analysts do? They tell stories, and they are rewarded for telling better stories not making better forecasts. The forecast is a number or a probability, but that number does not stir action. It is the story. 

The Fed provides a number and a SEP forecast, but it is the story from Chairman Powell that moves markets. The retelling of the Fed story provides a new model and differentiates one analyst form another. 

The data are all the same. It is the narrative that makes for differences. Trades are based on differences in narrative.

See: Narrative and investing - Follow the facts