You really need to take predictions with a grain of salt. Consider these esteemed opinions:
- “I think there is a world market for maybe five computers.” Thomas Watson, Chairman, IBM, 1943
- “Who wants to hear actors talk?” H. M. Warner, Founder, Warner Brothers, 1927
- “Everything that can be invented has been invented.” Charles Duell, Commissioner, U.S. Office of Patents, 1899
It’s important to remember the fallibility of experts as we head toward a new year and pundits begin pontificating about the events of the past and predicting what may be ahead.
In November the UK saw inflation rate fall to a four year low of 2.1%. This was despite Jeremy Cook, chief economist at the foreign exchange company, World First, warning that inflation was likely to rise in December. The Office for National Statistics said the change was caused by slower increases in food and energy prices.
Jeremy Cook added, “This good news may not last too long, however, given the increase in utility costs that are to hit the basket next month courtesy of recent price rises by energy providers.”
Over in the U.S., Barron’s recently pointed out how well U.S. stock markets have performed this year: “Not since 1995, when stocks climbed 34 percent without as much as a 3 percent dip, have we enjoyed a year as agreeable as this. No pain, all gain has turned U.S. stocks into a consensus favorite, the People’s Choice award winner, the king of the hill. But, it’s no longer the road less travelled.”
The publication tweaked market optimists by pointing out economists’ consensus opinion the U.S. economy will grow by 2.6 percent – admittedly a pretty modest pace for growth – may not seem like a stretch, but it could be. The point was 2014 is almost certain to bring some jarring economic transitions like less monetary support through quantitative easing. Reduced liquidity could negatively affect economic growth (Gross Domestic Product growth in 2013 is projected to be just 1.7 percent).
In a separate article, Barron’s shared insights from 10 strategists – Wall Street professionals who acknowledged 2014 may offer investors a bumpy road. However, their consensus expectation is the Standard & Poor’s 500 will finish 2014 higher. “…Their mean prediction is 1977. The bullish consensus might trouble contrarians, but Wall Street’s pros see ample reason for optimism, given their expectations of a stronger economy and rising corporate profits.”
As you read conflicting opinions about where we’ve been and where we’re going, it’s critical to remember short-term macroeconomic and market predictions should not be given too much weight. You built your investment strategy to meet your long-term investment goals.