06 Nov 2013 – Expect All Those Financial Predictions To Be Wrong
This time of the year usually brings a great assortment of financial predictions for the year ahead.
And here’s the reality – most of them will be wrong.
To be fair, I will give some credit to CommSec’s Craig James who predicted the ASX would end up 12-15% and he wasn’t too far off (at the time of writing).
Although, it’s worthwhile going back in history to look at some of James’ previous predictions to see how his call this year was more luck than great foresight.
In 2011 James predicted the ASX to go up 15%, it went down 15%
In 2010 James predicted the ASX to go ahead 15% for the year, it went down 0.73%.
In 2009 James predicted the ASX to go ahead 30% and it went up 33%.
In 2008 James predicted the ASX to go up 12% and unfortunately it went down 42%.
I’m not sure if you’re noticing the pattern, but Craig James never predicts the sharemarket will go down!
Going back further, it appears he’s actually never predicted the sharemarket to fall!
And apart from his 30% upwards prediction in 2009, his predictions always appear to fall in the 12-15% range!
Not that I’m looking to single out Craig James, he just serves as a useful example.
If you pay attention you’ll find virtually every other bank or financial institution economist makes similar predictions.
And more often than not it’s because their employers want you feeling positive so you’ll trade more shares or take on debt.
According to Bloomberg data over the past 13 years, most sharemarket predictions are wrong by at least 10%
I can freely admit I have no way of knowing what the sharemarket will do next year because most market influences are unforeseeable.
The best any of us can do is properly structure our portfolios to capture rises and minimise falls across the various assets classes.