I know just where the stock market will be on December 31st, 2018. Not just the Dow Jones, but the tech-filled NASDAQ as well. And heck, let’s throw in an international stock index just to really impress! Let’s pick the London Stock Exchange, shall we? Please read on for my end of year market predictions for 2018!
Come On Andy, Really?
Investment market predictions are offered by a lot of different types of folks, but in general they have job titles like Market Strategists, or Investment Strategists. Sometimes they work for stock brokerage firms or write newsletters. And these folks are typically very smart and similar to active mutual fund managers (which I discussed here) they have a lot of talented people working for them.
But can they really tell you where the market will be at any given point in the future? Even an hour and a half in the future? I’m going to go out on a limb here, and say no.
So, my end of the market prediction for 2018 is…I have no idea! Let’s dive deeper into why it’s so hard to predict “the market’s” future, and what this implies for your investments.
“It’s tough to make predictions, especially about the future.” Yogi Berra
Does Any Strategist Get It Right?
That’s not to imply that some market strategists don’t get really close (or even exactly right) with their forecasts. And a lot of the predictions are based on sound interpretations of historical patterns and data. But in general predictions fall into several categories:
- A lucky or skillful correct prediction
- An incorrect (or WAY incorrect) prediction
- Consistently incorrect predictions
And you may notice one category that’s absent: consistently correct predictions. Because I just don’t know anybody who can consistently forecast the future. There might be that person out there. But I can’t imagine who they are. And if such a person exists, why would they have a job in the first place? Why wouldn’t they just buy the asset that best represented their vision of the future and continue to get wealthier and wealthier over time?
The Things That Get In They Way Of Knowing The Future
Ok, first of all, I can’t believe I’d write a heading like that in the first place. But since I think this is an important topic, here are the factors that I can see that can derail a good market prediction:
- Companies’ performance can vary from the strategist’s assumptions
- Political events or instability can make predictions difficult
- Geopolitical turmoil can disrupt expectations
- Economic conditions are unpredictable
- And in the end markets are made up of people who, inconvenient though this may be, are pretty unpredictable
I know I’m being pretty sarcastic here. But in the end, I just don’t think anyone can successfully and consistently predict the future. And you as an investor shouldn’t base your financial future on these types of forecasts. But then what can you do as an investor in the face of the uncertain and unknowable future? I believe it’s pretty simple actually:
If you’ve put time into thoughtfully putting together your investment portfolio, the day to day (or even month to month) movements in the markets shouldn’t matter. So, as I’ve mentioned here before, the secret is to understand your timeline, your investment goals and your risk tolerance. And then structure your investment portfolio around those factors. That way you can make it through the inevitable market downturns, and maybe even find some bargains along the way. An even more shorthand version of that statement: Have a well thought out plan for your portfolio and stick to that plan.
Next time we’ll talk about the things you should consider when putting that portfolio together.
In the meantime, if you like these posts please drop me a line at firstname.lastname@example.org. And better yet, drop me a line and pass this post on to a friend or two who you think may benefit from these insights!
Thanks so much for joining me this week. I truly appreciate it!
Till next time!