Risk of Narratives: When Everyone Saw Them Coming But Still Got It Wrong

An X post recently illustrated an age-old truth about markets and human nature perfectly. The author said India's macroeconomic indicators are looking splendid—gross domestic product (GDP) growth exceeding estimates, inflation under control, currency stability, and room for rate cuts. The conclusion? We're entering a "virtuous cycle" of prosperity.

- Dhirendra Kumar

It's a compelling narrative, and like most compelling narratives during good times, it suffers from a familiar problem. "Success has many fathers, but failure is an orphan," as the old saying goes. And nowhere is this more evident than in the way we construct stories about economic cycles and market movements.

When economic indicators align favorably—as they apparently do now—the explanations flow like early monsoon rain. Suddenly, everyone connects the dots. Lower food prices lift consumer spending, which boosts corporate margins, strengthens the currency, creates room for monetary easing, and stimulates growth. It all feels logical, inevitable, perfectly choreographed.

But here's what's curious: if these relationships were so clear and predictable, why wasn't everyone positioning for this virtuous cycle months ago? Why weren't all economic forecasters unanimous? The answer is—they weren't. Outcomes always appear more logical in hindsight than they do in real time.