Tackle Today: Forecasting is Hard
December 9, 2022
«See Europe and Oil.»
The financial markets do unusual things all the time. They like to fool the majority. And they make forecasters look incredibly foolish. Not that that’s a knock on forecasters. Become one, and you too will be humbled.
Here are two examples from 2022 to help illustrate the point.
On February 24th, 2022 Russia invaded Ukraine, sending shockwaves across the globe. Given the continent’s heavy reliance on Russian energy, the outlook for Europe quickly soured, and European stocks tanked. Truly this was a year for U.S. equities to outperform, right?
Believe it or not, European stocks have slightly outperformed the U.S.
The second illustration is closely connected to the first. What would your forecast for crude oil prices have been at the beginning of the year if you knew the world would be grappling with the highest inflation of a generation and that Russia would invade Ukraine?
It’s safe to assume your guess would have been somewhere between up a little and up a lot, right?
Oil is down on the year.
Keep these two examples in mind as you read all the year-end predictions for 2023. They should all be taken with a grain, nay a metric ton, of salt. Nobody knows nothin’.
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