Inflation and deflation forces exist and the dominant outcome is uncertain at the moment, but equity investors should consider inflation risk within their asset allocation framework.
Tag Archives | forecasting
A one sentence stream of consciousness born after listening to too many ‘what-ifs’ and ‘on-the-other-hands’ will leave you sitting firmly on the fence, which is neither a comfortable nor useful position.
The memo from Howard Marks titled ‘Expert Opinion’ explains how forecasting is more art than science, and we give too much weight to many expert opinions which are little more than a 50-50 guess.
Given how difficult it is to forecast statistics such as GDP, employment or inflation, investors should ignore macroeconomics. Even if forecasts were accurate, they are not very useful for valuing shares.
Too many variables affect the market and economies, and most are unforeseeable or overly complex to understand. Instead of wasting time on such macro issues, it’s better to focus on your investment edge.
A final look at the ‘January effect’ to analyse whether the market’s first month performance predicts the share market’s likely year-end returns, and why Australia is different from the US.
It’s not low or high commodities prices, or even rising or falling prices, that matter for the share market. A pattern relating to changes in the rate of change can be observed as far back as the 1950s as a useful forecasting tool.
Long term investing makes sense for the majority of investors who have time on their side, but it isn’t always easy. Unexpected events will test your resolve so it’s important to know how to improve your chances.
Obviously it’s best to sell high and buy low, but in the irrational world of stock markets, the past may offer little guide to the future. The most we can realistically expect is to learn how to tilt the odds in our favour.
* Here at Cuffelinks, we are highly sceptical about the value of most economic forecasting. Seems many of the best financial minds agree.