Each year there are a few telltale signs that let us know it’s January: Resolutions are made. Gym memberships spike. And financial journalism is full of forecasts and projections about what the next twelve months may bring. Navigating New Year’s market predictions can be challenging, but investors who push past the headlines and stay focused on an intentional, long-range plan can increase their likelihood of ultimately achieving investment goals.
Keeping market predictions in perspective
Financial journalism presents investors with speculation on market trends throughout the year, but January is peak season for predictions. And while they may be common—and appear very compelling—there are several good reasons to take market predictions with a grain of salt.
The first thing to consider is that financial journalism, like mainstream journalism, tends to “lead with the negative.” New Year’s market predictions are often full of ominous headlines forecasting a high probability of recession, market correction, or the return to a bear market. Headlines that evoke a strong emotion like fear or anxiety grab our attention and make us want to read more.
What makes for good reading, however, doesn’t necessarily make for a sound basis upon which to form investment decisions. Knowing that financial journalism tends to skew to the negative can help investors resist the temptation to panic and react impulsively with each news cycle.
The negative bias is one reason to exercise caution when consuming financial journalism; another is the fact that predictions are just that—predictions. Over time some of them will turn out to be correct, and many of them will not. For these reasons, we recommend that long-term investors refrain from making decisions based on the uncertain, short-term, and often negatively biased stimuli of economic headlines.
An alternative to prediction-based investment strategies
Basing investment decisions on economic outlooks and market predictions is really just another form of market timing strategy, fraught with uncertainty and an unending cycle where each decision leads to the necessity to make even more decisions.
Since it is virtually impossible to consistently know the right times to invest in, get out of, and then re-enter the market, we would suggest that the annual predictions are irrelevant to a purposefully planned investment strategy. Instead, we aim to support investors in maintaining the discipline and patience needed to tune out the noise of media headlines and focus on aligning your plan with your long-term goals and objectives.
Interested in navigating this year’s market predictions from the perspective of an intentional, long-term plan? Contact us today to discuss your goals for your financial future.