"The markets hate uncertainty."

If you wandered anywhere near a television in advance of the midterm elections, the Federal Open Market Committee meeting or October's employment report, that cliche was unavoidable. It was the pundits' preferred proverb.

Wall Street has a sweet tooth for such investing maxims. They infect the trading community like influenza in December. Repeat mindless dictums ad nauseam, and they soon become the accepted wisdom.

The problem with these supposed truisms is they are no more accurate than the flip of a coin. A closer look at this uncertainty meme reveals it to be a false-ism -- one of those emotionally appealing phrases that ping around trading desks. The lack of evidence supporting their premise seems to matter very little.

To recognize how meaningless these statements are, consider the opposite: Could markets function without uncertainty? It takes only a little thought to realize that markets actually thrive on doubt, imperfect information and a lack of consensus.

Uncertainty drives the market's price-discovery mechanism. Investing requires there to be differences of opinion. When there is broad agreement as to an asset's fair value, trading volume falls. Without any uncertainty, who would take the opposite side of your trade?

History teaches that whenever the opposite occurs -- when certainty overwhelms uncertainty -- the herd tends to be wrong. In rare instances, when there is a near-total lack of uncertainty in the market, the outcome is usually a spectacular disaster.

David Fuller's view When everyone has the same market view, and has acted upon it, the pendulum of sentiment is at an extreme and the next significant move can only be in the opposite direction.