Forecast Frenzy

Tis the season when financial institutions provide their forecasts for the coming year.  Several firms have already published their forecast.  

RBC and several other firms believe the S&P 500 will make new records in 2024. Whereas Wells Fargo and others have differing opinions. Wells Fargo’s forecast for 2024 said, “It’s really hard to get excited?”1 

So, who is right? And should you even listen to the forecasts? 

History of Market Forecasts 

History demonstrates forecasts are seldom accurate. The experts predicted that 2022 would be positive – not even close as we experienced a difficult bear market.  And for 2023, the consensus correctly expected interest rates to rise, but missed badly by predicting a global recession would occur this year.2   

And then you have the dire predictions that get our attention. When we see forecasts we often just read the headlines and seldom look at the disclosures or “fine print.” But this is really important. For instance, Chaikin Analytics says that their alerts and signals (predictions), “should not be relied upon for investment decisions.”3 

 Responding to Forecasts 

Famed investment guru Howard Marks has his own opinion about forecasts. He said, “There’s really no such thing as analyzing the future because the future is unknown.”4 

So what do we do in the face of forecasts?   

• We must remember that financial forecasts are often inaccurate. 
• This is because the future, by nature, is unpredictable.   
• Follow the money. Many news and financial forecasts are nothing more than paid advertisements from companies trying to sell you something. 
• Ignore forecasts and focus your energy on remaining disciplined to your investment plan. 

I understand this advice is easier said than done.  

_{1. NBCDFW, CNBC affiliate, Nov 27, 2023} 

_{2. Bloomberg, Oct 28, 2022} 

_{3. https://www.chaikinanalytics.com/. Disclosure part of sponsored ad on Facebook.} 

_{4. Oaktree Capital Management Letter, June 2022}