Regular TEBI readers will know how shockingly unreliable short-term market forecasts are. But the highly well-paid people who make these pronouncements are looking more foolish than ever.
Bloomberg is reporting that, just six weeks into 2016, Goldman Sachs has abandoned five of its six recommended top trades for the year. It also says that seven of the 21 strategists whose forecasts it tracks have lowered their projections for the Standard & Poor’s 500 Index after recent falls in stock prices.
“The reason there’s more divergence among forecasters,” one such guru explained, “is that equity strategists have a huge problem with predicting two wild cards right now: China and oil.”
To quote the inimitable Josh Brown, “the bullshit machine is undergoing maintenance very early in the year”.
The media loves these sorts of forecasts. It can’t get enough of them. But Josh’s post on the subject yesterday is a must-read for any investor foolish enough to be still giving them any credence.
“You don’t need ‘wild cards’ thrown into the mix,” says Josh. “No one can ever do this reliably. It has nothing to do with oil or China. Next year it’ll be interest rates and Greece, or Chicken and Waffles or whatever comes down the pike.”
In a similar vein, Tim Richards writes:
“The truth is that no one’s in charge, and no one has a damn clue how markets or stocks are going to move. All explanations are post-hoc rationalisations based on intuition and dumb modelling. The only solution is to ignore it all, treat it as noise and focus on the few things you can control. Buy quality as cheaply as you can, diversify heavily and be patient. Everything else is a giant con.”
Enough said.
Robin is a journalist and campaigner for positive change in global investing. He runs Regis Media, a niche provider of content marketing for financial advice firms with an evidence-based investment philosophy. He also works as a consultant to other disruptive firms in the investing sector.
