So often, we hear prophecies about the future direction of travel for markets from so-called ‘experts’ and ‘analysts’.
Now, please don’t get me wrong, I will always talk about my views and opinions on what is happening or what might happen in markets, politics, tax legislation, etc. In fact, I love to have these conversations. However, I am always very clear that I “don’t have a crystal ball” and that markets have usually priced in all known information, and so generally the only thing that moves markets is new, currently unknown information, which subsequently comes to light.
The issue I have is that these so-called experts and analysts seem to act as if they do have a crystal ball. As if they can see the future. They seem to state their views and opinions as facts and because they are “experts and analysts” they must know what they are talking about – surely?
The other issue with experts is that because they are experts and because they must know what they are talking about, people then listen. And those people who listen then act – often to their own detriment.
Just to illustrate this point, let’s look at a few projections from December 2021 not just from individual experts, but from some of the most respected investment institutions in the world.
Back in December 2021:
JP Morgan predicted that the US stock market would rise by 5% this year (now of course that could still happen, but we are heading in the wrong direction).
A group of economists thought that the US 10 Year Bond yield would stick around 2%.
Goldman Sachs prophesied that the price of Bitcoin would top $100,000.
What actually happened?
The US stock market is down circa 20% in local currency terms.
The 10 Year US Bond yield is now over 3%.
Bitcoin has more than halved in value and is now trading below $25,000.
How wrong they were!
Now, the reason behind all of these huge misprojections is unknown information. Things that we didn’t know about back in December 2021. If you had acted on any of that information, you would be feeling rather down at the moment I would imagine.
The good news is that unknown information can surprise you on the upside as well. When it does, it generally gets very little attention or headlines, but it is there working away, delivering returns in markets over periods of years and decades.
The point here is that nobody knows. Nobody can predict future unknown events with any certainty (that would be why we call them unknown events then!). Nobody knows what stock markets will do tomorrow, next week, next month, or next year.
Just bear that in mind the next time you see the analysts predicting what will happen next!
