This Market Makes No Sense – A Wealth of Common Sense

If you’ve ever stared at a market headline and thought, “Cool. None of that explains this,”
congratulations: your brain is functioning normally.

One week the stock market is acting like it just discovered espresso. The next week it’s acting like it
discovered existential dread. Meanwhile, bonds are quietly collecting cash, startups are getting funded for
ideas that sound like a parody pitch, and households are still sitting on mountains of deposits like they’re
preparing for winter in a Netflix survival series.

Ben Carlson’s “This Market Makes No Sense” isn’t a complaint as much as it’s a diagnosis: the market can look
irrational when we treat it like a single, consistent personality. In reality, it’s a crowded stadium full of
different participants shouting different things at the same timesome prudent, some panicked, and some trying
to YOLO their way into early retirement.

Why the Market Feels “Broken” (Even When It’s Not)

1) “The market” is not one thing

When people say “the market,” they usually mean a major index. But indexes are a blend of sectors, styles,
time horizons, and motives. A retirement plan contributions machine can push money into broad index funds while
day traders treat single-name options like scratch-off tickets. Those things can be true on the same day, in the
same market, without contradicting each other.

2) Prices move on expectations, not today’s mood

Markets are messy prediction engines. Prices don’t wait politely for GDP, inflation, and corporate earnings to
arrive neatly packaged. They move on forecasts, narratives, and changes in “what people think will happen next.”
That’s one reason the market can rally during ugly economic news or fall during “good” databecause it’s reacting
to how new information changes the future story, not the current chapter.

3) Liquidity and flows can overpower fundamentals (for a while)

Fundamentals matter, but flows matter toosometimes painfully. When huge pools of money move (index contributions,
retirement accounts, institutional rebalancing, hedge hedging, CTA trend chasing), prices can detach from what
feels “reasonable” in the short run. In the long run, cash flows and earnings have gravity. In the short run,
gravity occasionally takes a coffee break.

The 2020–2021 “Two Markets” Problem: Speculation and Caution at the Same Time

One of Carlson’s sharpest points is that a speculative vibe can exist alongside cautious behavior. In his 2021
post, he notes the surge in options tradingespecially call optionswhile also pointing out record levels of money
still flowing into “boring” vehicles like broad index funds and fixed income. In other words: part of the crowd is
partying in the penthouse, while another part is double-checking the smoke alarm.

Options: the volume tells a story

Options activity became impossible to ignore in the early 2020s. Options are not inherently reckless (they can be
used to hedge risk), but the rise in single-stock options volume and the “lottery ticket” mindset became a defining
feature of the era.

• The market saw historically heavy call-option trading days and a jump in single-stock options notional activity.
• Clearing and exchange data showed record-setting options contract volume in 2021, highlighting how mainstream
  options became.

The “meme stock” episode also made it clear how social sentiment, narratives, and retail participation can
concentrate demand in a way that looks irrational if you only use old-school valuation lenses.

Meme stocks: when narrative becomes a catalyst

The meme stock surge wasn’t just a finance storyit was a culture story. Social media communities, zero-commission
trading, easy-to-use apps, and a public desire to “fight the system” all collided. The SEC’s staff report on early
2021 market structure describes how social-media-driven bullish sentiment and intense interest from individual
investors contributed to dramatic price moves in certain stocks.

If you tried to explain that moment using only price-to-earnings ratios, you’d feel like you brought a calculator
to a karaoke bar. Useful tool. Wrong venue.

Index Funds and ETFs: “Boring” Can Still Move Markets

While speculative corners were heating up, broad index funds and ETFs continued to vacuum up money. That matters
because passive flows don’t ask permission from “fair value.” They buy based on rules: contributions come in,
allocations get applied, indexes get tracked. When inflows are huge, that steady bid can influence pricesespecially
in the largest names that dominate major indexes.

In 2021, U.S.-listed ETF inflows were on pace for around $900 billion, and mid-year inflows had already surpassed
the prior full-year record. That’s not necessarily a bubble signal by itselfbut it is a signal that the plumbing
of the market has changed.

Why it can feel weird

• Concentration: The largest companies can become a bigger slice of the index, amplifying moves.
• Auto-buys: Regular contributions create a constant, price-insensitive demand stream.
• Behavioral comfort: After volatility, “just buy the index” feels like emotional insurance.

The twist is that “boring” investing can coexist with frothy behavior. People can dollar-cost average into index
funds with one hand while placing weekly call-option bets with the other. The market doesn’t judge. It simply
clears the trades.

Bonds Still Attract Money (Even When Yields Look Unexciting)

Another source of confusion: if we’re in a speculative mania, why does money keep pouring into fixed income?
Carlson cited data suggesting bond fund inflows were extremely strong around 2021despite low yields.

The simplest explanation is that investors don’t share one risk appetite. Institutions, retirees, target-date
funds, and liability-driven strategies still have a job to do. Bonds may look “boring,” but boring is a feature
when you’re trying to fund a pension or avoid turning your retirement into an improv show.

The Startup World: When “Unicorn” Stops Being Rare

Public markets can feel confusing, but private markets can feel downright surreal. In the early 2020s, startup
valuations soared, funding rounds multiplied, and “unicorn” became less mythical. Reports from the venture
ecosystem noted an astonishing pace of new $1B+ companies in 2021enough that the label started to lose its shock
value.

This is a classic “liquidity finds a costume party” phenomenon. When capital is abundant, it doesn’t just go into
safe assets; it also goes looking for big stories and big outcomes. And a startup pitch is basically a story with
a spreadsheet cameo.

Cash on the Sidelines: The Plot Twist Nobody Mentions Loudly Enough

Here’s the part that makes “This market makes no sense” feel extra true: even when risk assets are hot, there can
still be a massive amount of cash sitting in deposits and cash-like instruments. That sounds contradictory until
you realize different people are doing different things for different reasons.

Federal Reserve flow-of-funds data shows households and nonprofits held roughly $18 trillion in currency and
deposits (including money market fund shares) in 2021and the level remained elevated in subsequent years. That’s
a lot of “I’m waiting for the perfect moment,” which, historically speaking, is an event scheduled for never.

Why cash piles up even in a bull market

• Uncertainty: People hold cash when the world feels unstable or headlines feel relentless.
• Behavioral whiplash: After volatility, safety feels smarter than it is.
• Life happens: Emergencies, house down payments, tuition, and “I just need a buffer.”

Cash isn’t “wrong.” But long-term, it can quietly tax you through inflation and opportunity cost. The “no sense”
feeling often comes from watching cash build up while risky assets rallylike sitting through the entire movie
trailer and still not going into the theater.

So… What Should Investors Do When the Market “Makes No Sense”?

First, breathe. Confusing markets are not a new species. They are the default setting.

1) Separate signal from spectacle

A meme stock spike can be spectacular, but it’s not always representative. A single sector rally can dominate the
news, but your portfolio’s outcome is usually driven by diversification, costs, and behaviornot your ability to
predict what Reddit will love next Tuesday.

2) Use a simple framework instead of a hot take

• Time horizon: Money needed in 1–3 years should not be taking a rollercoaster.
• Asset allocation: Pick a mix you can hold through drawdowns without panicking.
• Rebalancing: Decide rules in calm weather so you don’t improvise in storms.
• Costs and taxes: The market is unpredictable; fees are guaranteed.

3) Accept that “makes sense” is often hindsight

Markets have a talent for looking obvious after the fact. Before the fact, it’s mostly vibes, probabilities, and
imperfect information. The goal isn’t to feel certain. The goal is to build a process that works even when you
don’t.

4) Don’t confuse activity with progress

More trading feels productive. It also increases the odds you’re paying spreads, triggering taxes, and reacting to
noise. Long-term investing is weird because the “work” is mostly not doing things when your emotions are begging
you to do things.

Real-World Investor Experiences: When “No Sense” Felt Personal

The best way to understand a nonsensical market is to look at how real people experience itbecause markets aren’t
just charts; they’re emotional obstacle courses with occasional confetti cannons. The stories below are common
patterns (not personal financial advice and not about any single identifiable person), but if you’ve invested for
more than five minutes, you’ve probably lived at least one of them.

Experience #1: The “I’m late” panic buy. Someone watches a rally from the sidelines, telling
themselves they’re being “disciplined” by holding cash. Then the market keeps rising. After enough headlines,
they finally buyusually after the rally is widely celebrated. The purchase isn’t based on valuation or a plan.
It’s based on FOMO. When the market inevitably dips, they feel tricked. But the market didn’t trick them; it just
did what markets do: move up and down while humans try to time their emotions.

Experience #2: The options “harmless fun” that becomes a second job. A small trade here, a quick
win there, and suddenly weekly expirations feel like a hobby. The investor isn’t trying to hedge; they’re chasing
dopamine. It’s easy to rationalize because it’s “only a small amount.” The problem is that the behavior scales:
small bets become bigger bets when confidence rises, and confidence tends to peak right before reality shows up.

Experience #3: The index investor who feels boring… until they don’t. A disciplined saver keeps
buying broad funds every paycheck. It feels uneventfuluntil a drawdown hits and their account drops faster than
they thought possible. This is the moment many people discover the true cost of owning stocks: volatility is the
admission ticket. The “no sense” feeling appears because the investor did everything “right,” and yet the
portfolio still fell. That’s not failure; that’s equity risk in action.

Experience #4: The retiree who wants safety and growth at the same time. Some investors need
stability, but they also need returns. When yields are low, they feel forced to reach for risk. When yields rise,
they worry they missed the best stock gains. This tug-of-war is emotionally exhausting because there’s no perfect
answeronly trade-offs. Markets feel nonsensical when you demand a risk-free asset that also outperforms inflation.
(If someone finds one, please notify the entire planet.)

Experience #5: The “cash mountain” that grows by accident. People often don’t choose a giant cash
allocation; it happens gradually. They stop investing for “a little while” waiting for clarity. Clarity never
arrives, but the cash pile does. Then, when the market is higher, they feel betrayed by their own caution. The
lesson isn’t “cash is bad.” The lesson is that cash needs a job description: emergency fund, near-term purchase,
or intentional allocation. Otherwise, it becomes procrastination with a bank statement.

Experience #6: The private-market envy spiral. Someone sees startup valuations skyrocketing and
wonders why their public portfolio doesn’t have that kind of sizzle. The temptation is to chase private deals,
illiquid assets, or high-fee strategies to “keep up.” The missing piece is that private valuations often update
less frequently and can feel smoother than they truly are. When markets make no sense, the worst move can be
assuming the grass is greener in the least transparent yard.

Experience #7: The “I knew it” storyteller. After a big move, everyone suddenly becomes a genius.
“I knew it would rally.” “I knew it would crash.” Memory edits itself for comfort. This is how markets stay
confusing: we rewrite uncertainty into certainty after the fact. A healthier experience is to admit you don’t
knowand build a plan that doesn’t require you to.

Conclusion: The Market Makes No Sense… Because It’s Made of People

Carlson’s point lands because it’s honest: you can see speculative mania and cautious behavior simultaneously.
You can see record options activity next to record index flows. You can see soaring startup valuations next to
massive cash balances. That doesn’t mean the market is brokenit means it’s plural.

The market “making sense” is not the goal. The goal is to make your plan make sense: choose an asset
allocation you can live with, stick to contributions, rebalance when needed, and resist turning short-term noise
into long-term decisions. The market will always find a new way to be confusing. You don’t have to.

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