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January 9, 2011

“Making Sense of Market Forecasts”

Jason Zweig’s article in the Weekend Investor January 8–9, 2011 highlights the inaccuracies of forecasts.  As many of you know this is one of my soapbox topics.  The heart of the matter is that no one can know the future or how the market will react to future events.  He notes that there have been some individuals that in a few instances did “call” future markets actions.  Subsequent “calls”have not been consistently accurate.  Since we do not know the future, we do not know how accurate their future predictions will be. 
The article notes that short-term forecasts seem to be more accurate than long-term forecasts.  He suggests that we should expect surprises.  He observes that long-term investors should not try to adjust their portfolios for short-term events or forecasts.  He suggests analyzing many forecast may give in investor a range that may be reasonable to expect. 
TO READ THE ARTICLE

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