The Folly of Forecasting
As the new year begins, numerous media outlets will present 2024 stock market forecasts by various analysts, making bold predictions about stocks, bonds, and the economy. However, before placing reliance on these forecasts, let's examine why they hold such allure.
Our brains crave predictability
We seek certainty over uncertainty due to an innate preference. Facing an unpredictable future, we desire clarity and assurances, satisfying our brain's need for order. Predictions, even inaccurate ones, provide a semblance of control and alleviate anxiety. Despite the complex and unpredictable nature of the world, pundits making detailed market predictions find an audience because of how our brains are wired.
A dismal record
Yet, the dismal track record of past forecasts should give us reason to pause. Previous predictions widely missed the mark, emphasising the difficulty of accurately predicting short-term returns in complex adaptive systems. Accepting uncertainty and focusing on what can be controlled is more prudent than getting distracted by false narratives.
Warren Buffett wisely noted, "Forecasts usually tell us more about the forecaster than of the future."
Market predictions are better for assessing the motives of pundits than divining economic or market outcomes. Therefore, it's advisable to ignore predictions and remember that significant events are inherently unpredictable, and human reactions drive markets more than facts.
Our stance
As advisers, I assure you that we won't alter your investment portfolio based on market predictions. Our focus is on comprehensive plans tailored to your financial goals, weathering short-term declines, and adjusting only when circumstances or priorities change. While curiosity about market forecasts exists, we emphasise an evidence-based investment strategy tied to human innovation and resilience.
So, in spite of inevitable fluctuations, my commitment is unwavering—to adapt and refine your financial plan to meet evolving needs, goals, and aspirations in 2024 and beyond. Here's to remaining focused on what matters most on your financial journey this year.