Economic and market forecasts are often wrong, but they're still useful.
Indeed, looking back on the past year, most market prognosticators and economists got the year's forecasts wrong.
That's because last year was supposed to be the year that the US economy fell into a recession, which led markets to bet that the Federal Reserve would cut interest rates by the end of 2023.
And while risk assets eventually rallied on expectations of policy changes, interest rates are still nowhere near where the markets had predicted at the start of last year.
And how about that well-telegraphed recession?
Well, even the Fed, which employs the most Ph.D. economists globally, got that call wrong.
So then, you'd think that they should have at least had the forecast partially correct, right?
Well, even so, policymakers ultimately decided to scrap their recession forecasts early last year despite the best predictions of their brain trust.
Add in financial doom and gloom from high-profile social media accounts that tipped off a run on some small regional banks, and still, the financial collapse that some market prognosticators anticipated simply did not pan out.
So then, if forecasts are so wrong so often, what's the point of paying attention to them in the first place?
Well, it all comes down to understanding directionally where the economy and markets are headed.
You see, well-known economist John Maynard Keynes was once quoted to have said that, "I'd rather be vaguely right than precisely wrong."
And what does this mean?
It means that you'll be better equipped to make solid financial decisions with your money and your wealth in the coming year by focusing on the factors that might affect the direction of the markets and economy rather than trying to divine the precise outcomes of one or another.
Read More About this Topic
Listen to the FI Mastery Podcast
Learn More About Our Financial Planning Services
Visit us at https://fimastery.com to learn more about the FI|Mastery Journey.
Be sure to follow us on Twitter: @fimastery and Instagram: fimastery
Economic and market forecasts are often wrong, but they're still useful.
Indeed, looking back on the past year, most market prognosticators and economists got the year's forecasts wrong.
That's because last year was supposed to be the year that the US economy fell into a recession, which led markets to bet that the Federal Reserve would cut interest rates by the end of 2023.
And while risk assets eventually rallied on expectations of policy changes, interest rates are still nowhere near where the markets had predicted at the start of last year.
And how about that well-telegraphed recession?
Well, even the Fed, which employs the most Ph.D. economists globally, got that call wrong.
So then, you'd think that they should have at least had the forecast partially correct, right?
Well, even so, policymakers ultimately decided to scrap their recession forecasts early last year despite the best predictions of their brain trust.
Add in financial doom and gloom from high-profile social media accounts that tipped off a run on some small regional banks, and still, the financial collapse that some market prognosticators anticipated simply did not pan out.
So then, if forecasts are so wrong so often, what's the point of paying attention to them in the first place?
Well, it all comes down to understanding directionally where the economy and markets are headed.
You see, well-known economist John Maynard Keynes was once quoted to have said that, "I'd rather be vaguely right than precisely wrong."
And what does this mean?
It means that you'll be better equipped to make solid financial decisions with your money and your wealth in the coming year by focusing on the factors that might affect the direction of the markets and economy rather than trying to divine the precise outcomes of one or another.
Read More About this Topic
Listen to the FI Mastery Podcast
Learn More About Our Financial Planning Services
Visit us at https://fimastery.com to learn more about the FI|Mastery Journey.
Be sure to follow us on Twitter: @fimastery and Instagram: fimastery