Let’s look back a year ago at what they predicted, and what actually happened.
At the beginning of 2013 the Financial News told its readers that "political storm clouds loom over the global economy. From Washington to Beijing, the financial markets are in thrall to seismic political events".
In The Economist magazine, their tone about 2013's prospects was equally skeptical, if not quite as florid. The magazine noted that while surveys showed investors were optimistic, the coming year was unlikely to be a bumper one.
This was because the past year's gains partly reflected relief that the worst fears about the euro zone had failed to materialise, the magazine said, which meant that reality might intervene as investors judged shares as expensive.
"Although investors are not as complacent as they were heading into 2000 or 2007, say, it is still hard to believe this will be a bumper year for returns," the columnist Buttonwood said in his column.
The skepticism was universal. The Australian Financial Review quoted analysts as saying the prospect of rising bond yields and slowing profit growth did not augur well for a repeat of the performance of shares seen in 2012.
"Analysts are predicting no end to the volatility that has gripped markets over the New Year period, posing dilemmas for investors wondering how to invest in 2013," the reporter concluded.
It's easier to see from all this that many investors might have taken fright at the developments around the turn of the year, and trimmed their exposures to shares because of these less-than-accurate” forecasts.
A year later their forecats were virtually all wrong
That would have been a shame because as of early December 2013, many global equity markets were notching up record-breaking years. In local currency terms, the US S&P-500, for instance, was up by just under 27% at time of writing, on track for its biggest annual gain in more than a decade.
In Japan, the Nikkei stock average was just over 50% higher as of early December in local currency terms, heading for its best yearly gain since 1972. In the UK, the FTSE 100 reached a 13-year peak in May this year. It has come off a little since then, but was still nearly 11% higher for the year by December.
Even in Australia, where an end to the mining boom and a strong local currency have triggered an economic slowdown, the local market as measured by the S&P/ASX 200 was still up 11% by December, having hit 5-year highs in September. The New Zealand NZX 50 was 16% higher, having set a record peak in November. All of these percentage changes are in local currency terms.
Nothing new - we know forecasting usally fails
Since 80% of active managers and stock brokers underperform the index, they a re not too hot at forecasting either.
As the year comes to an end again, there are still plenty of gloomy stories to fill the newspapers – including ongoing speculation of what happens when the US Federal Reserve begins tapering its monetary stimulus program.
This isn't to say these stories are necessarily incorrect. Most of them accurately reflect the sentiment prevailing at the time they were written and the uncertainty about the future as expressed in prices.
But as an individual investor, there is not much you can do about that. These expectations and uncertainties are already built into the market. Investing is about what happens next. We don't know what happens next.
That's why we diversify across low cost efficient non-forecasting funds
And think about this. If any of these gurus really had a crystal clear view of the future, why would they bother sharing it with the world?
In the meantime, many happy returns!
With thanks to Jim Parker, Vice President, Dimensional Fund Advisors, Sydney
Supplied by Alan Clarke, financial & retirement adviser, & author. His second book is virtually complete, & he also writes regular articles for the media & on line – see www.acfs.co.nz
Alan is an independent authorised financial adviser (AFA) FSP26532 & his disclosure statement is available on request and free of charge.