It\u2019s the start of the year and strategists and economists have announced their forecasts for 2020. Like every year, there\u2019ll be plenty of predictions telling us what we can expect markets to do in the upcoming year, a few so outrageous in their optimism or pessimism that they really grab the headlines.<\/p>\n
For investors, however, being right matters more than grabbing headlines. And being right is much harder than being outrageous.<\/p>\n
In his forthcoming book (7 Mistakes Every Investor Makes (And How to Avoid Them)), Joachim Clement, CFA examines the S&P 500 return forecasts of investment professionals over the last 20 years. In 13 of those years, beginning-of-the-year predictions were off by more than 10 percentage points. Often, they didn\u2019t even correctly call the stock market\u2019s direction.<\/p>\n
The ability of \u201cexpert\u201d market forecasters is often so poor that investors are better off assuming that nothing will change at all. In fact, predicting that stock markets will be right where they are today a year from now not only tends to be more accurate than even the most skilled individual forecast, but also more accurate than the consensus forecast.<\/p>\n
So when it comes to forecasts, economists and analysts should avoid making them and investors should avoid listening to them. It\u2019s far better to focus on much longer-term trends such as equities beating cash hands-down over almost all rolling ten-year periods.<\/p>\n
The only think we do know is that 2020 will be another year full of surprises and up\u2019s and downs. The good news however is that it is nothing new, nothing that markets hasn\u2019t seen before.<\/p>\n
We should therefore look at the past and see what investment strategies has consistently worked time and time again. We should focus on the things that we can control and not on the things that we can\u2019t control.<\/p>\n
To guide you through this investment journey get in contact with us.<\/p>\n