On why markets jump to extremes (and why most outcomes live in the middle)

I’ve been thinking about how quickly markets jump to the best‑case or worst‑case narrative on any new headline, while the actual outcome almost always lands somewhere in the middle. This week’s VAT rumour around Chinese internet companies (Tencent in particular) was a good reminder: one datapoint, and suddenly the market was behaving as if the worst plausible tax outcome was almost guaranteed. I wrote a short piece on this idea (using Tencent only as a brief example) focusing on sentiment vs fundamentals and how we, as investors, can regulate our own reactions rather than trying to regulate price action. I’d be interested in how other value‑oriented investors here think about: – anchoring on extreme narratives vs thinking in probability distributions – practical ways you keep your process grounded when headlines push disaster/euphoria narrative Link to the post in case anyone wants the full context: [https://open.substack.com/pub/utthaan108/p/the-markets-favourite-game-assuming?r=710eo3&utm\_campaign=post&utm\_medium=web&showWelcomeOnShare=true](https://open.substack.com/pub/utthaan108/p/the-markets-favourite-game-assuming?r=710eo3&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true)