I have been investing for 40 years and I have heard these same types of predictions again and again. These oracles of prediction have a remarkable ability to craft a plausible sounding scenario that is only exceeded by their ability to be spectacularly wrong. I know some people won’t believe me when I say this so let’s try a thought experiment:
It’s February 9, 2020, the SP500 just hit a high of 3,380.
You get a message from the future about the economy but unfortunately, it’s cut off before the end, so you only get to read what’s going to happen but not what the impact on the markets are.
“The world will soon enter a global pandemic which is still continuing. People will be locked down in the houses for months on end, unemployment will soar, schools will be closed. There will be shortages of basic materials, international travel will shut down, sporting events won’t have any crowds. Hundreds of thousands of people will die in the US and millions will die around the world. The government will borrow trillions of dollars to try to save the economy causing inflation to soar. There will be anti-police riots across the US. Many stores will be looted and burned”
Think about what your reaction would have been.
What would you have expected to stock market to be 18 months later? Would it have been “logically” the time to sell? If someone else said, after reading the same text, that the SP500 would go up around 30%, would you have believed them or would you have thought them insane? Whose advice would have made you richer?
I am not saying the market had to go up, as you know it crashed and recovered but it could have stayed down for a long time. What I am saying is that no one knows what is going to happen. The market may crash, boom or go sideways but it won’t be accurately predicted by anyone.
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