Embracing and taking advantage of market uncertainty
June 04, 2025
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5 min read
JOHN KAVOLIUS: We're entering a period of heightened policy and geopolitical uncertainty. How do you view this impacting what you own in the portfolio today?
AZIZ HAMZAOGULLARI: There's something called hindsight bias. And what that is, is we, as human beings, believe that the world is more certain than it is in any given day. And then after the fact, we explain things as if like we knew what was going to happen next.
This shows you in hundred and fifty years there were twenty-three fifteen percent or more corrections in the market from eighteen seventy-one to two to two thousand twenty-two. So if you divide a hundred and fifty by twenty-three that's six point five. So every six and a half years you're having a major event in the marketplace. The day before these major events happened, if you go back and look at the newspapers and see what people were saying back, back in nineteen hundreds, you will, you're going to see that in most of the cases people were blindsided.
With the hindsight bias, we have this mentality of risk on risk off. We say, oh, it's risk on because we don't see any risks right now in the marketplace without realizing you will never, most of the time you will never see the risks before it happens. So what that means is that you have to, I think, you know as investors, we embrace this uncertainty and we take advantage of it, because at the end of the day, they will keep happening.
You know, this time, maybe this is the twenty fourth event in hundred and fifty-two years, it is a tariffs. So it is almost always uncertain, it's just that some days we think it's not because we are not seeing it, it is around the corner, the risk is around the corner, and you do not make money by explaining history.
What happened? It's a good storytelling, but it doesn't generate alpha for you. So we believe you have to always understand that there's a risk around the corner that no one is talking about and what by the time people start talking about it, it's usually too late.
