Professional Economic Forecasts Are Often Wrong

“The quest to know the future is somewhere between useless and destructive when it comes to investing,” Allan S. Roth, who runs a Colorado financial planning firm, writes in the latest issue of Financial Planning magazine.

Roth says anyone trying to forecast the future in order to make investment decisions should heed the example of the country’s highly-paid professional economists. Time after time studies of their forecasts have shown them to be off the mark when making predictions about interest rates, stock markets, and economic trends.

For instance, at the beginning of 2014 The Wall Street Journal solicited interest rate forecasts from 46 well-known economists. Forty-five predicted rates would rise, and the 46th predicted rates would remain the same. Instead, long-term interest rates dropped substantially.

“Economists are no better than the proverbial dart-throwing chimpanzee in making economic predictions,” Roth says.

Richard Schroeder CFP®, Jan. 5, 2015

Richard Schroeder
Richard Schroeder