Whenever a bull market gets long in the tooth, you will start to see articles with extreme stock market predictions–both bullish and bearish. To be honest, we disregard all of them—with one exception.
Why You Should Ignore Stock Market Predictions
As you might imagine, we read our fair share of financial articles online. Pundits tend to make headlines because they have been around for a while, and news outlets know their sensationalist predictions will attract a lot of attention.
Just for the sake of example, we’ll pick on Jim Rogers, cofounder of the famous Quantum fund that gained 4200% from 1970 to 1980, while the S&P advanced about 47%. He isn’t the only famous market ‘forecaster,’ but he has quite a history of making bold predictions. Here are a few:
- 2011: 100% Chance of Crisis, Worse Than 2008: Jim Rogers
- 2012: Jim Rogers: It’s Going To Get Really “Bad After The Next Election”
- 2013: Jim Rogers Warns: “You Better Run for the Hills!”
- 2014: JIM ROGERS – Sell Everything & Run For Your Lives
- 2015: Jim Rogers: “We’re Overdue” for a Stock Market Crash
- 2016: $68 TRILLION “BIBLICAL CRASH” Dead Ahead? Jim Rogers Issues a DIRE WARNING
- 2017: THE BOTTOM LINE: Legendary investor Jim Rogers expects the worst crash in our lifetime
These bold predictions span 2011 through the current year – and he has been dead wrong each and every year. Now, even if he had been right and there was a market correction in any of those years, we would still pay just as little attention to his predictions – because just as no one can predict a coin flip, nobody can accurately and consistently predict market movements. The article that originally collected these examples correctly states ‘a market crash is always a possibility. But using scare tactics to get people out of the market (or keep them in) isn’t helpful to anyone’.
The Only Accurate Stock Market Prediction
One of the only things we DO agree with from Rogers’ overblown stock market predictions is that you don’t know what events will cause markets to have a correction. However, trying to predict the amount or duration is not possible or advisable.
Take the Ebola outbreak for example—it spooked markets and caused a significant downturn for stocks. It was a sudden health crisis, but it had nothing to do with market fundamentals or the current level of stock prices. It had a short-term effect on markets, but it did not actually change companies like Proctor and Gamble or Apple’s ability to operate and make money for investors. It is always important to remember that stock ownership represents owning a small part of a real company, especially when you feel tempted to worry about unpredictable events. Short-term dips and spikes can always happen just due to market sentiment. Remember that market corrections are extremely common and occur with great frequency – you and I will live through many more corrections in our lifetimes.
The great news is that our course of action doesn’t need to change regardless of whether the pundits are predicting markets soaring or tanking. At Halpern Financial, our clients’ portfolios are appropriately diversified and designed for individual financial situations. We have exposure to a wide variety of equity, alternative (real estate) and fixed income asset classes which are not correlated with each other, and we use a variety of mutual funds and exchange traded funds from a myriad of fund companies. This diversified strategy is designed to weather a variety of financial conditions and is not dependent on predictions about which way the markets will move.
In fact the only market predictions we ever make at Halpern Financial are as follows:
- Markets will trend up over the long term
- Corrections occur regularly, and we will see plenty of corrections in our lifetime
That’s it. Nothing you didn’t know before, but it is worth reminding yourself when you start browsing around online and begin to wonder whether “this time is different.” Over 100 years of market history tells us that it isn’t. These two simple predictions will not tell you if markets will rise or fall tomorrow, but they will give you the proper mindset to create an investment plan that is not dependent on the whims of short-term market timers.
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