Predictions For 2024
Morgan Housel has this habit of writing things that make me say, “That is incredibly good. I wish I wrote that.” His blog post, Long-Term News, falls squarely in this category.
The blog post is written in the format of a financial news story (including fake quotes) but instead of focusing on the short-term, expiring information, cited by every financial article you will ever read, it focuses on the long-term, permanent information, that actually matters to an investor’s success. For example, he writes:
“This week alone, we’ll add the equivalent of the population of Seattle to the global economy in new people with the odds in their favor of growing up more knowledgeable and productive than you or me,” said Bryan Douglas, an economist with Deutsche Bank. “This year we’ll add the equivalent of the population of New York. Same next year. It’s just amazing.”
Asked what his forecast was for Q4 GDP, Mr. Douglas looked confused. “Did you just hear what I said about all the new people? That’s what’s going to matter over the coming decades.”
OR
"In Baltimore, 24-year-old Tim Donovan opened a Roth IRA, depositing $500 into an investment account to compound over the next half -century in a vehicle that didn’t exist 20 years ago. “This is the first generation that’s had access to two things,” said financial planner Christy Eckert. “Super-low-cost investment options, and easy, tax-free investment vehicles. No other generation has begun their savings lives with those two advantages. Don’t underestimate where that will put them 40 or 50 years from now.”
Reports of Baby Boomers worried that younger generations lack the motivation and morals of their parents were met with pictures of a 1974 hippie commune and a plea from 28-year-old Travis Garner who said, “Look, every generation eventually figures it out and finds their own way. We’ll be fine.”
The reason I love this so much is because it states the obvious in such an interesting way. As I host client meetings this quarter, the conversations will undoubtedly turn to the topic of interest rates and our predictions for the year ahead, but the reality is that none of it really matters.
Corporate earnings may come in higher than expected or the Fed may lower interest rates faster than expected. Consumer sentiment may move upward while inflation figures may get revised downward. All of these are predictions that tell you nothing about what the market is going to do from one day to the next and market forecasters relying on such things are likely to miss the mark by a wide margin.
This December 23rd article from the NY Times, Wall St. Loves to Guess, but Nobody Knows What the Market Will Do in 2024, provides some useful context:
"In 2018, for example, the market fell 6.9 percent, though the forecasters said it would rise 7.5 percent, a 14.4 percentage point difference. In 2002, the forecast called for an increase of 12.5 percent, but stocks fell 23.3 percent, a spread of almost 36 percentage points. And in 2022, the forecast called for an annual increase of 3.9 percent. But the stock market lost 19.4 percent. The forecasters were wrong by a margin of more than 23 percentage points. Taking gaps like these into account, the median Wall Street forecast from 2000 through 2023 missed its target by an average 13.8 percentage points annually — more than double the actual average annual performance of the stock market."
So when you see predictions that look well informed, like:
"The median forecast on Dec. 19 called for the S&P 500 to close 2024 at 4,750, according to Bloomberg. "
OR dire predictions like:
"Harry Dent, US economist, predicts 2024 will bring 'biggest crash of our lifetime'"
Take them with a big grain of salt. While I don’t know exactly what will happen over the next twelve months, I’m willing to bet the ranch that there will be A LOT of short-term nonsense to deal with. Successful investors are the ones who can position themselves to endure a never-ending parade of nonsense. The least successful investors are the ones trying to avoid it entirely.