I tend to give people my forecast for the property market in the next 5 years. However, I rarely told anyone my forecast about the stock market in the next 5 years. Why?
Let me recap some common questions I am asked by people:
Where will the S&P be at the end of the year?
My answer is: I don’t know.
Where will the 10-year treasury yield be at the end of the year?
My answer is I don’t know.
Where will Crude oil and gold be a year from now?
My answer is I don’t care.
Will the U.S. enter a recession next year?
My answer is I don’t know.
What will be the best-performing stocks/sectors/asset classes over the next day/month/year?
My answer is I don’t know.
How could you be an excellent fund manager if you don’t know the answers to the above questions?
My answer is: I am not sure if the 9-year expansion/bull market will end this year or continue for a few more years. I am not sure whether U.S. stocks will continue to crush international/EM in the years to come or finally start to lag. I am not sure if the 35-year secular bull market in Treasury bonds is over or if yields will turn down once more. I am not sure if the Fed will hike rates once, twice or more over the next year and what impact if any that will have on markets.
But that’s alright because as luck would have it “knowing” (or more accurately, thinking you know) the future is not a prerequisite to making money in markets.
In fact, just the opposite is true: admitting you know nothing is your best weapon as it will push you towards long-term diversification (higher probability outcomes) and away from making overconfident short-term bets (lower probability outcomes).
So I am not afraid to say “I don’t know.” In the business of investing, it’s probably the most honest and helpful thing I can say.
Let me recap some common questions I am asked by people:
Where will the S&P be at the end of the year?
My answer is: I don’t know.
Where will the 10-year treasury yield be at the end of the year?
My answer is I don’t know.
Where will Crude oil and gold be a year from now?
My answer is I don’t care.
Will the U.S. enter a recession next year?
My answer is I don’t know.
What will be the best-performing stocks/sectors/asset classes over the next day/month/year?
My answer is I don’t know.
How could you be an excellent fund manager if you don’t know the answers to the above questions?
My answer is: I am not sure if the 9-year expansion/bull market will end this year or continue for a few more years. I am not sure whether U.S. stocks will continue to crush international/EM in the years to come or finally start to lag. I am not sure if the 35-year secular bull market in Treasury bonds is over or if yields will turn down once more. I am not sure if the Fed will hike rates once, twice or more over the next year and what impact if any that will have on markets.
But that’s alright because as luck would have it “knowing” (or more accurately, thinking you know) the future is not a prerequisite to making money in markets.
In fact, just the opposite is true: admitting you know nothing is your best weapon as it will push you towards long-term diversification (higher probability outcomes) and away from making overconfident short-term bets (lower probability outcomes).
So I am not afraid to say “I don’t know.” In the business of investing, it’s probably the most honest and helpful thing I can say.
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