The market is full of statements that are true just often enough to be dangerous:

• “Small caps lead in recoveries.”
• “Volatility mean-reverts.”
• “Buy the dip.”

Each of these works. Except when they don’t. They’re not wrong so much as conditionally true: valid under a certain regime, dead wrong outside it.

That’s the trouble with markets. The laws keep changing.

Investors crave simplicity. We want rules, heuristics, principles. The problem is that most of them are statistical regularities disguised as moral laws. “Buy quality.” “Hold for the long term.” “Diversify.” Each of these ideas sounds like wisdom because it’s right on average. But averages are the most dangerous things in finance—they hide the tails.

A truth that’s conditional on regime, liquidity, policy stance, or crowd positioning isn’t really a truth. It’s a description of what worked last time. Traders who survive know this instinctively. Analysts and educators, tragically, often don’t.

Examples of Conditional Truths

Let’s take a few favorites.

1. Small caps lead in recoveries.

True when credit spreads are tightening and fiscal policy favors domestic firms. False when inflation or rate pressure dominates.

It’s not a structural law—it’s just that smaller firms are more cyclical. They rise faster when risk appetite returns, and die faster when it doesn’t.

2. Buy the dip.

True in liquidity-backed, QE-era regimes where every sell-off brings the Fed cavalry. False in tightening cycles, energy shocks, or any world where “the dip” becomes a cliff.
The idea that the market “always comes back” is a sample-bias artifact: people who traded Japan in 1990 or tech in 2000 can’t repeat the slogan because they no longer manage money.

3. Volatility mean-reverts.

Yes, within a regime. But the mean itself drifts. After 2008 or 2020, “normal vol” shifted permanently higher for years. Mean-reversion traders spend fortunes discovering that a moving target is still a target.

4. The market rewards patience.

It does, but only if you’re patient and right. If the regime changes while you wait, patience becomes paralysis. Long-term investors often mistake duration of conviction for evidence of correctness.

5. Value always wins eventually.

True in mean-reverting inflation cycles. False in technology-driven deflation or structural shifts. Some factors are cyclical, others are dying species.

Why We Believe Them

1. They used to work. Markets have cultural memory. A rule that made money for a generation becomes gospel, even after the conditions that birthed it vanish.
2. They moralize probability. “Be patient.” “Be disciplined.” These are virtues, but markets aren’t moral systems. They’re ecological ones.
3. They feel empirical. A chart of 100 years of data gives a comforting illusion of permanence. But every data point was drawn under a different institutional world: gold standard, fixed exchange, QE, crypto. Aggregating them into one “truth” is like averaging gravity from multiple planets.

The cure isn’t cynicism—it’s conditioning.
Instead of memorizing market “rules,” ask three questions before acting on any aphorism:

1. Under what regime is this true?
2. What observable data define that regime?
   (Credit spreads, policy direction, volatility regime, real rates etc)
3. How quickly can I tell when it changes?
   (Your stop loss or re-estimation frequency is your answer.)

Conditionally true statements become tools again once you re-attach their conditions. You stop treating them as commandments and start treating them as Bayesian priors—useful, but temporary.

Markets punish certainty, not ignorance. The investor who knows when a truth stops being true outlives the one who believes it unconditionally. The difference isn’t intelligence. It’s humility.
And that, inconveniently, is the only rule that seems to hold across every regime.

Disclaimer

This document does not constitute advice or a recommendation or offer to sell or a solicitation to deal in any security or financial product. It is provided for information purposes only and on the understanding that the recipient has sufficient knowledge and experience to be able to understand and make their own evaluation of the proposals and services described herein, any risks associated therewith and any related legal, tax, accounting, or other material considerations. To the extent that the reader has any questions regarding the applicability of any specific issue discussed above to their specific portfolio or situation, prospective investors are encouraged to contact HTAA or consult with the professional advisor of their choosing.

Except where otherwise indicated, the information contained in this article is based on matters as they exist as of the date of preparation of such material and not as of the date of distribution of any future date. Recipients should not rely on this material in making any future investment decision.