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There is nothing wrong with forecasting…it only becomes a problem when you try to draw your own conclusions (also a forecast) and use it to shift an investment strategy. I see people get into trouble with that.
Why?
Because even when you are smart as fu*k, it’s hard to be right when forecasting.
David Kostin of Goldman Sachs is one of the best strategists on Wall Street–and I’m stating an actual fact here, 100% proven by just me to be one of the best, so I am indeed using a real fact {insert sarcasm} no matter what data scientists say.
Said more conversationally, I think he’s smart as fu*k.
Back around May 11th, he published an outlook…a forecast…where he felt that pessimism would once again grip the market and send the index back down to a level of 2,400. At that time, the S&P 500 was around a level of 2,900 so that would have equated to about a 17-18% sell-off.
On Friday, May 29th, he published a new outlook where he changed his three-month S&P 500 prediction from that previous level of 2,400 up to 2,750.
His rationale for that 17-18% pullback was ground in analytical rigor.
His rationale for moving the outlook up to 2,750 is grounded in the same rigor.
His year-end forecast is for the S&P 500 is 3,000.
Today, the S&P 500 is hovering around 3,050.
Meanwhile, as Kostin and Goldman shift from bearish to bullish, we see JP Morgan’s strategist Marko Kolanovic, who encouraged investors to buy the dip in March, shift his outlook from bullish to more bearish over political and trade concerns.
Marko, yeah, I think he’s smart as fu*k, too.
And remember Bill Ackman? That guy is no dummy either. His forecast from back in March?
I’m not saying they WERE right or wrong, I’m not saying they WILL be right or wrong…, in fact, it’s rarely about being right and wrong. I’m just saying that their outlooks are forecasts and it’s hard to be right when forecasting.
Forecasting is mostly luck and in case you didn’t/don’t watch the Showtime series “Billions,” last night’s episode (Season 5, Episode 5) had a very short yet amazing scene related to this:
Winston, (the algorithm guru played by Will Roland) states at the beginning of a celebratory scene, “I think it’s bad luck to be empty-handed for the toast.”
Rian, (Ryan but with an “i”, the irreverent new hire to the newly formed Taylor Mason Carbon played by Eva Victor) responds with, “Luck? There’s probability, plausibility, and actuality. Luck is superstition. Luck is lazy math.”
“God, I love it!” I screamed as my wife said, “Wait, what? Why?” I just said, “Ha, you never read my blogs,” as I was rewinding.
It’s best to take luck out of the equation and focus on putting patience, discipline, and time on your side. And a good wealth plan and good advice really helps with that. As I said last week:
Investing is rarely just about making more money. It’s usually more of a balance between protecting capital, planning for cash needs, AND making more money.
At Monument, our mission is to help our clients maximize their probability of long-term financial success, confident in our view that just because you have a complicated financial situation doesn’t mean you’ll benefit from overcomplicated financial advice.
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Keep looking forward.
This first appeared on Monument Wealth Mangement.
Related: The Market Sell-Off Is Coming: How to Position for It