By James E. Wilson via Iris.xyz
As the popular Christmas song recorded by Andy Williams (and more recently by Garth Brooks, Harry Connick, Jr and others) says, “it’s the most wonderful time of the year.” However, this time of year can also be the most dangerous time for investors. The next few weeks will find us deep within the “silly season” of predictions about the economy and markets for the year ahead.
Predictions are Mostly Erroneous
If you want some instant awareness of just how erroneous most of the predictions are, pull out any publication you like from this time last year. Virtually no one predicted the overall economic growth or increase in the broad stock market. The consensus was, in fact, that markets would likely decline substantially.
Despite the awful track record, market predictions are published each year and investors can always find one that suits their own particular narrative. This is called Confirmation Bias and results in investors excluding information that doesn’t support their particular beliefs.
An Uncommon Prediction
One prediction that you may be unlikely to see is one that says, “Financial markets are expected to function normally.” While that indeed may be what is most likely, there is no call for immediacy or response to that prediction, so it fails the test for financial journalists.
Click here to read the full story on Iris.xyz.