Market Forecasts and Predictions
By Gary Silverman, CFP®
As I’m writing this, it is 9 a.m. on December 6th. The stock market is down. This should not be news to you because for you December 6th is in the past. You already know that at various times in the last quarter of 2018 the Dow Jones 30 (DJIA) has been down as much as 9% from its highs earlier in the year. As you read this, it is either up or down since then.
The problem with writing columns like this is that there is a one to four-week delay from when I write something until you read it. So, to be current I need to be prescient. Unfortunately, this is not one of the spiritual gifts God has chosen to give me. The last time I saw economic prophecy in action was Joseph dealing with commodities in Egypt. The DJIA doesn’t go back that far.
But fear not, for I can give you reasons for why the stock market will go up from my writing this to when you read it. I can also give you reasons for why it will go down. You can then choose which to read depending on what actually happened.
What? You think this might be disingenuous? What if I called it a forecast or a prediction…would that make my words sound more authoritative? No, probably not, especially when I give two opposite forecasts with equally intelligent-sounding reasons behind it. Still, a synonym (at least according to Microsoft) for both forecast and prediction is “guess” which is exactly what any look into the future is.
When it comes to the markets, guessing can go into the past as well. On December 3rd (the past for both you and me), the Dow dropped over 799 points. People wanted to know why, so I looked up what the experts said triggered the plunge:
- The index broke through both the 50- and 200-day moving averages
- Brexit was going in a way that would seriously mess up the economies of Europe
- Indications were that the housing market was slowing
- The trade deal between the US and China wasn’t looking all that much of a deal
- Big-name tech companies continued to slide bringing memories of 2000
- The Treasury curve inverted
- News of NATO and nuclear treaties being tussled by the U.S.
- Folks leaving the market ahead of a financial holiday
There were more, but you get the idea. No one item was the consensus reason. All were potential reasons. None might have been the real reason. By the time I’m writing this no one really cares anymore what happened three days ago and many of you reading this might not even remember that a drop of almost 800 points even happened.
All this is to say that when you hear that the market went one way or another and the pundits show up on TV or in a blog and espouse their wisdom, know that they are guessing. And it certainly doesn’t get any better when they look into the future.
Gary Silverman, CFP® is the founder of Personal Money Planning, LLC, a Wichita Falls retirement planning and investment management firm and author of Real World Investing