Why reading financial forecasts for 2022 is a BAD idea

Why reading financial forecasts for 2022 is a BAD idea

We are 10 days away from Xmas. I hope you’re all set for the holiday period and look forward to a much better year in 2022! I want to leave you this last email message for the year.

As 2021 draws to a close, you may turn to financial media to find out what’s in store for 2022 and what it means for your finances.

This can be dangerous as it could lead you down the wrong path. Economists and market forecasters often get it wrong. Let’s look back at what they predicted a year ago.

One panellist from a Bloomberg survey in the US predicted healthcare stocks would be among the top performers in 2021. As it turned out, they were one of the worst.

Another panellist picked Chinese stocks to be among the leaders. But China struggled all year amid a government crackdown on multiple industries.

 In Australia, a group of esteemed economists picked a 4.9% increase in Sydney property prices and a 4.4% gain in Melbourne. By the middle of the year, however, prices in Sydney were already 19.3% higher over 12 months and Melbourne was up 15.0%.

The point here is unless you can forecast tomorrow’s news, it’s unlikely you’ll have any success in forecasting tomorrow’s markets. It’s one worth keeping in mind as you come across predictions about what to expect for 2022.

We don’t know what 2022 holds in store. And we can’t act on predictions as that’s no different from placing a bet.

What you CAN do is focus on your and your family’s aspirations, save regularly, invest with discipline and limit risks through diversification.

This is a much better use of your time and energy. As Warren Buffet said, ‘Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.’

I hope this makes sense. Feel free to reach out to me if you have questions.

I wish you a very happy festive season. Speak soon in the new year!