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A Sensitive Practice at the Heart of Neoliberal Capitalism – Developing Economics
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This article was originally posted on The Economic Sociology and Political Economy
community blog.

Since the emergence of modern financial markets, financial analysts have played a
critical role in producing visions of “the economy” and its future development. As
experts, they analyze market developments and predict future scenarios that enable
other financial market participants to speculate on the rise or fall of stock
prices, the success or failure of particular investment products, and the growth or
decline of entire national economies. The substance of the analysts’ valuation and
forecasting practices is, however, heavily disputed among economists. In
neoclassical economic theory, the assumption that markets are informationally
efficient has challenged the legitimacy of the work of financial analysts since the
establishment of the efficient market hypothesis as a central paradigm in the mid
1960s. Alternative schools of thoughts – such as new institutional or behavioral
economics – have criticized this paradigm. However, they have also argued that the
degree of uncertainty, which is inherent to financial markets, makes prediction
impossible.

Empirically, this critique has been around even longer. In 1933, economist Alfred
Cowles published an article that tested the attempt to forecast stock market
prices. After having analyzed thousands of stock market predictions from 16
financial service agencies, Cowles came to the conclusion that “[s]tatistical tests
of the best individual records failed to demonstrate that they exhibited skill, and
indicated that they more probably were results of chance.” Such results have been
confirmed repeatedly. In the UK in 2012, for example, Orlando, a ginger cat that
tapped over the pages of the Financial Times to select stocks, outperformed a group
of financial professionals.

The lack of justification of the forecasting practices financial analysts deploy

brings up an important question: Why do financial analysts exist at all? How do
they manage to maintain their role as experts in the market? And how they cope with
the uncertainty and lack of theoretical and empirical foundations of their
practices?

I spend two years in the financial analysis department of an internationally

operating bank, where I was given research permission to follow the financial
analysts’ work practices on a daily basis. In my book Stories of Capitalism: Inside
the Role of Financial Analysts (University of Chicago Press, 2018), I illustrate
how, in the absence of theoretical and empirical justifications, analysts base
their work on what they refer to as “market feeling” – a technique that builds of
affect, tacit knowledge, and experience – to make sense of market developments.

In the first weeks of my fieldwork, a financial analyst who coached me, told me how
I could learn to do financial analysis. He advised me to take some time getting a
“feeling” for how markets work. “This takes a lot of time,” he explained, “but
basically, you just have to observe the market and read financial newspapers and
the reports of other analysts.” The analyst then stared off into space, groping for
words. After a while, he said, “You know, it’s not just about observing and
reading, it’s about…” He did not finish his sentence since he could not put into
words how one should develop that feeling for the market he was talking about. “You
know, it’s about…,” he made a gesture as if he was touching a very smooth fabric to
check whether it was made of silk. “That feeling,” he continued, “is what
differentiates a good analyst from a bad one.”

Weeks later, another analyst allowed me to sit next to him when he valuated a
company’s stock in order to come up with a forecast. To come up with a company’s
“target price,” that is an estimated future price of a stock, this analyst first
looked at the facts and figures presented in the company’s quarterly financial
statements. After looking at the numbers depicted on the statement, he entered them
into the bank’s internal computer program. He was, however, not happy with the
target prices proposed to him by the models he used. He looked at them and then
told me that the numbers support his overall feeling. Looking at the numbers a
second time, he sighed, turned to me, and said, “You know what, I’ll take the most
bullish target price and adjust the projections on the overall market development a
little. After that, I’ll have a target price that truly reflects my feeling about
the future development of this particularly promising stock.”

Combining such market feeling with calculative practices allows financial analysts
to create persuasive narratives of the future of the market. These narratives
become visible in the way analysts explain future market developments. Moreover,
they are inscribed into the aesthetics of charts, tables, and figures analysts
produce to visualize past, current and potential future market developments. Once
these narratives are created, they are circulated among the banks’ stakeholders and
clients. Sometimes, the narratives also become part of broader public discourse –
often through the help of newspapers and TV stations that give financial analysts a
platform to share their opinions on economic developments.

The establishment of such narratives is critical to modern financial markets, as

they construct a sense of meaning in an environment that is governed by coincidence
and characterized by a lack of regularity. Financial analysts thus produce images
of the market as an institution that is not speculative and randomly developing,
but accessible and understandable though the analysts’ expertise.

What does this tell us about the nature of capitalism in general? In “Millennial
Capitalism: First Thoughts on a Second Coming,” Jean and John Comaroff argue that
the production of visions of the future – which are sometimes reminiscent of
techniques of divination as observed by anthropologists – are a characteristic
feature of how capitalism in its neoliberal form materializes in everyday ethics
and practices.

Speculating on possible future developments, they state, is a new form of

enchantment: It feeds on imaginaries of the future and on the notion that through
the anticipation of the future, wealth can be created without effort. With this in
mind, the forecasting practices deployed by analysts can be understood as a
particular form of enchantment fostered by neoliberal capitalism. Rather than
representing a disputable practice, the work of financial analysts is thus at the
heart of today’s financial market economy and a characterizing feature of
capitalism in its neoliberal form.

Stefan Leins is a senior lecturer of social anthropology and cultural studies at

the University of Zurich and a member of the research program Anthropology of the
Economy at the London School of Economics and Political Science. His book Stories
of Capitalism was published by the University of Chicago Press in 2018.