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RAPPORT

Uncommon truths

The Aristotle List: 10 improbable but possible outcomes for 2019

It is time to forget central scenarios and think about improbable but possible outcomes. Given the current gloomy sentiment, our surprises are largely on the positive side (these hypothetical predictions are our views of what may happen even if they do not necessarily form part of our central scenario).

Aristotle said that “probable impossibilities are to be preferred to improbable possibilities”, meaning that we find it easier to believe in interesting impossibilities (B52s on the moon, say) than in unlikely possibilities. The aim of this document is to seek those unlikely possibilities -- out-of-consensus ideas for 2019 that we believe have at least a 30% chance of occurring. The concept was unashamedly borrowed from erstwhile colleague Byron Wien, who recently published his 10 surprises for 2019.

We believe the biggest returns are earned (or the biggest losses avoided) by successfully taking out-of-consensus positions. A year ago, the consensus was optimistic about higher US stock prices but pessimistic about real estate and emerging markets. Hence, a lot of our improbable but possible ideas took the opposite view (“S&P 500 finishes the year lower than it starts”; “real estate outperforms as bond yields rise”; “Russian stocks outperform major indices” etc). The mood now seems more negative, so our ideas focus on the positive but we have strived for a diversified list.

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