70° and Sunny With a Chance of Inflation
February 02, 2023 | BY Our Partners at Equinum Wealth Management
Forecasting the stock market and interest rates is a pursuit that has captivated investors for centuries. A huge cohort of Wall Street brain cells surrounds the prediction business of markets, interest rates and other economic forecasts.
However, the reality is that predicting the future movements of these financial indicators is an exercise in futility. As of the end of 2021, the median of twelve leading Wall Street forecasters analyzing the S&P 500 was to end calendar year 2022 at the 4,825 level, according to Bloomberg. The highest was 5,300 and the lowest was 4,400. The S&P 500 closed at 3,839. Is it an overstatement to say these predictions aren’t worth the paper they’re written on?
It has been a particularly tough year to predict with the outbreak of the war in Ukraine, China’s Zero-tolerance Covid policy and backbreaking inflation. But that is exactly the point! “Forecasting is difficult because it concerns the future,” goes an old Danish proverb.
Instead, it is crucial for investors is to have a well-crafted and balanced financial plan and to remain steadfast in adhering to it through thick and thin.
The stock market is a complex system that is influenced by a multitude of both known and unknown factors. Predicting its movement is like predicting the weather – it may be possible to make educated guesses, but ultimately the future is uncertain. Similarly, interest rates are influenced by a plethora of macroeconomic factors, such as inflation, GDP growth, and monetary policy, making it impossible to predict their movements with certainty.
What investors should focus on instead, is creating a financial plan that is tailored to their unique circumstances and goals. This plan should be grounded in sound financial principles such as diversification, asset allocation, and risk management. By diversifying their portfolio across different asset classes, investors can reduce their overall risk and increase their chances of achieving their financial goals.
A well-crafted financial plan should be flexible and adaptable to changing market conditions. This means that investors should be prepared to make adjustments when necessary, while remaining focused on their long-term goals.
Is your financial plan on sound footing? Reach out to us at [email protected] to get a professional analysis of your current plan.