“Part of success is preparation on purpose”- Jim Rohn
It’s that time of year again, a time when we turn the calendar and welcome a new year. It’s a time when we take a few moments to reflect on all that transpired over the year that just passed, and a time where we start to think about what we’d like to accomplish in the year to come. It’s also a time when financial pundits and economists start their annual routine of trying to predict what might happen in the markets and the economy over the course of the next year.
While it may be fun to listen to everyone’s crystal ball predictions (including family, friends and colleagues), we must remember that predictions are not facts and, quite often, predictions are wrong. Just recently, blogger and analyst Barry Ritholtz reminded us that, at this time one year ago, “85% of economists thought we’d be in a recession by now, and that US unemployment rate would be >5.5%…” That certainly is not the case, just like the price of Apple (AAPL) didn’t fall below $100 this year, as predicted by The Motley Fool , and US home prices didn’t experience a significant decline either, as predicted by JP Morgan .
What are we hearing for 2024 predictions? If you follow market history, it’s a little difficult to tell, especially where 2023 was such a good year. For example, history shows us that there have been a fair number of bad years that followed good years in the markets:
But history also shows us that there also have been a fair number of positive years that followed up years in the markets, including 16 separate clusters of good/great years:
Not only are we coming off a strong year in the market, but several other factors will influence the market in 2024. It’s an election year, artificial intelligence is exploding, and geopolitical conflicts remain. Each of these alone can significantly impact the markets, for better or worse. Furthermore, how will they collectively shape the economic landscape? Many will try to predict, but no one truly knows.
So how do we navigate through the noise of predictions? In the words of one of our favorite bloggers, Ben Carlson, it is better to prepare than to predict .
“Prediction is about trying to be right while preparation is about setting the right expectations. And investing has a lot more to do with setting reasonable expectations than being right all the time because it’s hard to be right in the markets.” – Ben Carlson
If you hold well-diversified portfolios aligned with your risk tolerance, financial goals, and time horizon, you don’t need to predict top-performing stocks or sectors. Tune out the noise of predictions and focus on what we believe is a key driver of success: your own behavior. Prioritize living within your means and investing in a way that aligns with your unique goals. Be patient and resist the urge to react to every market blip. Today’s headline can be forgotten news tomorrow, and the constant barrage of news can create a sense of perpetual crisis. Remember, it’s your long-term financial journey that matters most.
Even if 2024 brings more volatility to the markets, we’re committed to helping you stay informed, make sound choices, and achieve your financial goals.