Eric Jacobson: The Federal Reserve decided not to raise interest rates in mid-June 2016, a decision that came as little surprise by the time it was made. In fact, Treasury yields moved very little following the meeting.
Investors haven't generally been that prescient over longer periods, though, and the Fed's decision casts a spotlight on just how wrong conventional wisdom has been over the past several years.
Ever since the 2008 financial crisis, and the government and central bank actions that followed, many have considered it a certainty that the outgrowth of policy decisions--such as keeping short-term rates low, and pressuring longer-term yields via so-called quantitative easing--would be rising rates.
At just about any given time in the past six or seven years, you could take the temperature of the investing public and generally come away with the impression that, while the sky hadn't yet fallen, it was just around the corner. The Fed's policies, in particular, would undoubtedly trigger inflation, and the markets would undoubtedly panic as a result.
Clearly, that hasn't happened. And even though predictions of doom have proven wrong, and the market has readjusted its expectations, the fear continues.
Obviously, the crowd can be, and often is, wrong. Unfortunately, asset flows over the past several years have shown that many investors have made big decisions based on those kinds of predictions. If there's a lesson to be had, it's that most often, investors are best served by making portfolio decisions based on their goals as investors, and not based on expectations of the crowd.