The behavioural biases discussed in Daniel Kahneman's 2011 classic Thinking Fast and Slow are central to Market Thinking and our efforts to not only understand the biases in other investors, but to control them in ourselves, We have now created a system that allows us to reduce our own unforced errors, while recognising them in others in order to understand better 'the narrative'. These tools are now being used in a newly launched UCITS fund bringing together Market Thinking and highly regarded alternatives manager Toscafund.

UK Inflation is driven by essentials like Food, energy and Housing - the cost of living crisis. The BoE's policy appears to be to raise 'taxes' in the form of higher mortgage costs to 'tame' this inflation. The only way this will work is to completely collapse demand for everything else. Crucially, the orthodoxy ignores the impact interest rates have on supply, rather than demand - lower rates increase supply and lower inflation, higher rates do the opposite. Bond vigilantes think this policy will support their market (which is why they are demanding 'credibility'.) Far more likely is stagflation, which is bad for everyone.

The recent squeeze in Mega Cap tech is actually part of a recent series of gyrations between Tech and Energy that was stimulated by the arrival of huge flows into ESG and has been exaggerated by front running both their inflows and the flows around momentum investing strategies that have been rebalancing

Our own experience confirms that most of the problems facing active fund managers are structural to the industry, ironically largely a result of risk management processes that limit the ability to vary benchmark risk according to market conditions. The model portfolios we discuss here on Market Thinking have been built over the last three years to explicitly avoid these issues and look to take the appropriate level of risk in both high conviction and low conviction markets - our definition of conviction being the scores we create as part of our market thinking process at the portfolio component level. As more than 2/3rds of the time we are in such markets, we see this as a key part of generating long term returns while having lower volatility and downside risk.

To out-perfrom a market, you need to take different risks than the market. The problem is that most active managers are institutionally prevented from doing so.