“What was 2016 like for you?”

This question was commonly asked at dinner and drinks parties over the festive break. People’s responses varied depending on what they felt about Trump, Brexit and celebrity deaths – but when quizzed further, it turned out that their personal life hadn’t been affected by any of those events.

Whatever you thought about 2016, history tells us that blips do happen, but they correct themselves over the long-term. When you look at the financial markets over time, you can see that they continually rise, no matter what. Here’s the proof:

Markets

Markets 1990 to 2016

Welcome to January – it’s forecasting season!

Despite that, many people are making predictions about what 2017 will bring. The financial pages are filled with ‘expert analysis’,  ‘investment outlooks’ and ‘hot stocks’.

To assess whether or not it’s worth listening to them, let’s examine some of last year’s forecasts:

  • RBS in the Telegraph (Jan 2016): “Deflationary crisis…cataclysmic year…decline in major stock markets of up to 20%…world crude oil prices falling to $16 per barrel…sell everything except high quality bonds.”
  • Outcome (Nov 2016): US and UK equity indices at all-time highs, Brent crude near $50 per barrel
  • Motley Fool (Dec 2015): “Three top Australian shares for 2016 = shopping centre Westfield Corp, digital real estate REA Group, healthcare company CSL.”
  • Outcome (Nov 2016): Westfield Corp shares down 4.3%, REA Group down 9.5%, CSL down 4.7%
  • The Australian (Dec 2015): “Currency play = UK financial services company, Top pick = James Packer’s Crown Resorts.”
  • Outcome (Nov 2016): AUD rose nearly 20% against the pound, authorities arrested 18 of Crown Resorts’ staff in a crackdown on illegal gambling in China

Of course, 20:20 hindsight means it’s easy to mock, but we hope you get the point. It’s impossible to predict an uncertain future.

Don’t make a drama out of a crisis

Do you remember the old advertising slogan for Commercial Union? We take a leaf out of their book, and say: “Don’t make a drama out of a crisis”.

As you know, our advice is always:

  • Ignore the noise
  • Diversify to spread the risk
  • Stick with the long-term plan

So why not sit down, have a cup of tea and finish the leftover mince pies while you enjoy these fun forecasts from @ReformedBroker on Twitter (Josh Brown):

predictions

 

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