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The Folly of Forecasting
“It’s tough to make predictions, especially about the future”
—Yogi Berra
Given it’s that time of year when Wall Street’s market strategists trot out their year ahead outlooks, we thought we might share our thoughts on the value of forecasting or perhaps the lack thereof. If the following sampling of prior year outlooks for CY2022 are any gauge, we doubt next year’s predictions are worth the paper they’re printed on.
Got Dividends?
If you’re of a certain age you’ll probably recall those Got Milk? commercials that were omnipresent in the mid-1990s. It was one of the all-time greatest ad campaigns, becoming a cultural touchstone. Seeing as milk consumption per capita in the US has been decreasing for at least 20 years, the milk producing industry might want to consider dusting off its old playbook. Though not entirely clear why Americans are drinking less milk, the decline is at least partially explained by an aging population.
Demographics might be hurting milk consumption, but aging populations in the US and other major economies are a distinct tailwind for income-producing securities, including dividend-paying stocks.
Finding Value in Disruption
Disrupted. Is there a better word to describe the past 12 months? Disrupted lives. Disrupted routines. Disrupted travel. Disrupted work. Disrupted education. Disrupted supply chains. Disrupted markets.
Investing Amid a Rising Range of Outcomes
The Q1 market selloff was broad-based and intense, fueled by deep uncertainty about the pandemic’s true threat. In our view, the market did little to discriminate among individual firms, preferring to re-rate sectors given the short timeframe, rapid price action and lack of information.
Of course, our process is built to capitalize on market dislocations, when fear and uncertainty dominate, as is the case in our current environment. But we are also vigilantly risk-aware. This is where a thoughtful and repeatable process makes all the difference.