The AARP has an end-of-the year warning for you: Most
predictions about 2018 stock market performance will be wrong.
In an online article dated December 15 and titled “Market
Forecasts Could be Hazardous to Your Wealth”, AARP reminds readers that the financial
experts are not all that good at predicting the future of the stock market, or
of anything else. The article’s author,
Allan Roth, cites a Wall Street Journal report that financial “strategists as a
whole have missed the actual return of the S&P 500 index [of stocks] half
the time by more than 9 percent annually.”
That’s not a small margin of error.
For 2017 the experts’ consensus for stocks’ performance was a rise in
the index of between 2.45% and 2.79%. As
of mid-December, the actual performance was an increase of 19%.
Not all the economists are wrong, though. Gary Schilling, for example, nailed every one
of his 12 predictions for the 2008 economy, including the housing bubble burst. Imagine the disappointment of those who then
chose to follow his advice for 2009, when all 12 of his predictions turned out
dead wrong.
It seems the most insightful relevant comment comes from
baseball legend Yogi Berra in the form of one of his trademark Yogi-ism’s:
“It’s tough to make predictions, especially about the future.”
So what am I going to do for this year-end posting? No, not make predictions, but share what
others are saying about what 2018 holds in store for the nation’s economy (and thus,
to at least some degree, your personal finances). Here are ten forecasts for the twelve months
ahead. I’m including in parentheses the
sources where I found the predictions, but keep in mind most of them are just
the consensus of many economists.
And I’m adding my own touch.
For each prediction I’m flipping a coin: “heads” means the prediction
will come true; “tails” means it will be wrong.
Next year around this time let’s compare and see if the experts were
right or if the random toss of a coin was a better seer.
1. Bitcoin (the so-called crypto-currency which is all the
[speculative] rage now) will decline in value in 2018. (Motley Fool) The coin toss says no, it will not decline.
2. Brexit (Great
Britain
3. Growth in the Gross Domestic Product of the U.S.
4. The price of crude oil will be $60 per barrel next
Christmas. (Fortune) The coin toss agrees.
5. The Standard & Poor’s 500 index will be at 2950 at
the end of 2018. (Brian Belski at BMO Capital Markets, and
many others) No argument from the coin
toss.
6. The yield on the 10-year Treasury note will be 2.8% next
December. (Kiplinger) The coin toss
affirms that prediction.
7. Inflation will be 2.1% in 2018. (Kiplinger) The coin toss says
no.
8. “A new form of energy” will be discovered on Venus. (Blind—and dead—Bulgarian mystic Baba
Vanga) The coin toss says no. I realize this prediction on its face is not
directly about the economy or your finances, but if such an energy source is
actually discovered it will profoundly impact financial markets. And in hopes of racking up a perfect
prediction record for myself, I’m going to weigh in on this one: It won’t
happen.
9. Unemployment will fall below 4% in the U.S.
10. Credit card debt in the U.S.
Do whatever you can to not make #10 come true. And have a Happy New Year.
Until next time,
Roger
“But the prophet who
prophesies peace will be recognized as one truly sent by the Lord only if his
prediction comes true.” Jeremiah 28:9 NIV®*
*Scripture quotations taken from the Holy Bible, New
International Version® NIV®
Copyright © 1973, 1978, 1984, 2011 by Biblica, Inc.™Used by permission. All rights reserved worldwide.
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