Going into last weekend, the forecast for snow was 80% with warnings of blizzard like conditions for our area of the country.
The reality was very different… We ended up with a dusting of snow on the ground and a few tiny flakes in the air. My girls were a little disappointed to say the least!
Forecasting weather is a difficult thing to do. Meteorologists use a complex system of measuring devices all over the globe to measure variables and then use computer models to predict the weather. The information system is huge and isn’t affected by emotion or behaviour. However, there are so many variables that can change, it’s still impossible to get this right all the time.
In fact, due to these variables, the very short term forecasts (I.e. the next 24 hours) tend to be accurate but have been known to be wrong. We also tend to know long-term trends, I.e. summer will be warm and dry, winter cold and wet. Anything in between is just guesswork!
Global stock markets are similar. They are huge systems with lots of data points being measured every day. We might have a feeling on a daily basis whether the market is trending down or up, but even then, forecasts can be wrong!
However, we know that over the long term the markets will tend to have long periods of growth punctuated with short sharp drops. The difference between markets and weather is that we have no idea when these periods of ‘cold weather’ will hit us.
Yet we still have ‘experts’ who predict where markets will be 12 months from now. These predictions will typically range from a huge rise in markets to utter Armageddon!
So what’s the message? Ignore the short and medium term forecasts and build a robust investment strategy designed to deliver the growth you need over the long-term whilst keeping enough liquidity in your financial plan to weather any short term storms.
If you need help in designing your all weather investment strategy, please do get in contact for a no obligation chat.
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