2026-01-26

your first lesson in markets

One of the hardest lessons to learn, i think, in public markets, is to understand that narrative dominates everything else. This has been pretty easy to see when looking at the latest Citrini research piece, forecasing a potential world economic scenario 2 years into the future. It's been such a major thing that you've even got Citadel writing responses to it. Tbh i dont think i've seen such a thing before.

wat u mean

People love stories. It's easier to read, understand and retain things when they're in story form. It's the reason that people like listening to true crime podcasts instead of reading actual court documents. Real life is boring and someone consuming that wants it on a silver platter, easy to digest.

So. It's only natural that markets move with narratives and stories. If you've ever read a Taleb book you'll hopefully remember how he frames randomness in markets. If not; about half of all trading days have stock indexes up rather than down. Yet far more years are positive than negative. That is to say, smaller time increments introduce more randomness, or in other words, no good reason for certain moves.

And yet, there is a multi-billion dollar business predicated on applying stories to slight daily moves in markets¹.

Because people want stories.

They can't accept that prices just move sometimes. Just coz.

There's even an old joke about why futures markets move. When people don't know, the story is "because CTAs".²

the result

The blog post took the market by storm and those weak performing SaaS stocks got smoked, even harder than they already were³.

They've somewhat recovered, but a you'll surely excuse me for thinking a 5% move on a random substack post is pretty substantial, for something the size of atlassian. They've already been the poster child for getting crushed in the ai age, admittedly, though i think the point still stands.

The post also got plenty of attention and eyes on Citrini's blog (which he earns $ from subscriptions from).

The stock, in this case, bounced back pretty quickly and the market seemingly moved on. In that 2 day period, did anything actually change for atlassian? No of course not. The company kept chugging along like it does, there's no real justification for the move. And yet we had that move.

wat do

What i want you to notice is that the economic fundamentals didn't change of owning the stock. The market didn't fundamentally change in a 2 day period. What happened, was there is this underlying ai-anxiety of the white collar workforce. People in finance, are typically counted as a subset within this workforce. So when a realistic sounding article spoke to them, they paid attention.

This attention seeped into their decision making during trading and resulted in these market moves.

People care about narratives.

so why do we care about data, real world events, geopolitics, and news? if narratives are all that matters?

Good question. Those shape the narratives. Just as one man's terrorist is another's freedom fighter, when you see that the nfp print⁴ is a measly +10k, you think sell stocks because the economy sucks. I may think that it's time to buy since the fed is definitely going to cut rates in response.

See where i'm going with this?

Your job as a trader isn't to predict what the price does, but to predict what the other guys trading are going to do. Those guys care about narratives and stories. Politicians don't get voted in on actual data, they get voted in on the narratives applicable to that data.

If you wanna trade this kinda stuff, you need to be able to understand the story that's going to form from it.

what i think

Like most things, i think the truth is probably somewhere in the middle of the two extremes. Somewhere between >10% unemployment and Paul Krugman's opinion on technology.

My thoughts will be further articulated in another post i've been planning so sub to the rss feed if you wanna see that.

summary for the lizard brain

Basically, i'm saying both that markets are overreacting, and that this is simply a narrative. The authors themselves point out that this isn't a base case scenario - simply 'a' scenario. I agree with that, and i believe it's a worthy thought experiment.

Honestly i didn't really even have a strong reason for writing this post, i just felt the need to share some intermittent thoughts on the whole situation since it's the only thing filling out my twitter feed a the moment.

- ouzo

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