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Whether Forecast

Summary

Forecasting is at best a thankless task, with the current spate of wet and bad weather, at least meteorology has improved but economic forecasting hasn’t, yet that doesn’t stop the annual January outpourings of where markets might be at the end of 2016.

Forecasting is at best a thankless task, with the current spate of wet and bad weather, at least meteorology has improved but economic forecasting hasn’t, yet that doesn’t stop the annual January outpourings of where markets might be at the end of 2016. We would contend whether forecasting is anything other than a PR exercise, in other words, it has little portfolio management value.
Among the worst start for global equity markets for years we have witnessed numerous emails either forecasting where the FTSE 100, All Share Index or other markets will be at the end of the year or some optimistic commentary presumably aimed at attracting new customers or keeping existing clients on board.
For us this reliance on geographic forecasting as the central pillar behind an asset allocation process is rather passé.  What we do know is that markets have become cheaper and loose holders and leveraged investors have become sellers.  China has become the elephant in the room. We can’t tell our clients where market indices will be in just under 12 months’ time but we can allocate to themes with long term growth supported by demand exceeding supply and to managers where indices have little relevance and are not portfolio construction tools.  The resultant portfolio cognisant of risk gives our clients a reasonable opportunity of continuing their wealth growth in real and positive terms whatever the investment climate.

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