The search for the ‘new normal'

Markets entered 2011 with discussions about what the ‘new normal' would be. This is standard investor behaviour because we all like to feel we have a handle on what is going to drive markets either up or down.

Investors dislike uncertainty, but in reality they dislike anything that challenges their own thinking about what drives markets. Hence the need to know what ‘normal’ is. The father of value investing, Benjamin Graham, summed up the new normal best with one of my favourite clichés: ‘plus ça change, plus c’est la même chose’ – the more things change, the more they stay the same. He was of course referring to wars, deregulation, new inventions, new countries, natural and man-made disasters. What may be called Black Swan moments are, in reality, events that happen all the time, meaning t...