Economic Forecast – a Ruse?


Key Takeaways

  • Stick with your plan and ignore the short-term “noise” from the so-called experts.
  • Look at things over a 3- to 5-year time horizon, not just last quarter. That’s where the real numbers come out.
  • You want to hold onto what you need from a cash flow standpoint, and make sure you’ve got the right mix of assets to reach your goals.

Contact us any time if you’d like to discuss your long-term plan in more detail.

Have you heard this joke before? How many central bank economists does it take to screw in a light bulb? Just one. He holds the light bulb while the entire earth revolves around him. All kidding aside, we’re at that time of year when we’re reading one economic forecast after another, and quite frankly, it’s like the proverbial chimpanzee throwing darts at a dart board.

About this time a year ago, 45 out of 46 esteemed economists predicted that interest rates would go up in 2014. The lone dissenter said rates would be flat. Actually, the reverse took place and we saw around a 0.8 percent reduction in the 10-year Treasury bill. But $140 billion dollars left the bond market because too many investors agreed with economists and didn’t want to see their bonds lose value from rising rates. We actually had a fairly good year in bonds, and those who jumped ship lost out.

Will interest rates eventually rise? Sure. But it’s hard to say exactly when. The same thing is true for your overall portfolio. You put something in place structurally that fits where you are in life today and that can help you withstand the short-term “bumps” in the night. If you’re a young person, your (working) income is growing and you can hold more equities. If you’re retired, you’ve got income from savings coming in and you want to address inflation and capital preservation. There are a lot of different issues to deal with, so you have to think long term and not try to time the markets or interest rates.

Every month, some newsletter or on-air pundit predicts the world is going to end, while at the same time another so-called expert is predicting things will be 10 times better than they are today. Don’t be fooled by all the noise. You have to stick to your plan and look at things over a 3- to 5-year time horizon, not just last quarter. That’s where the real numbers come out. You want to hold onto what you need from a cash flow standpoint and make sure you’ve got the right mix of assets out there.

That’s the whole thing about trying to outperform the market averages. It’s a very difficult game. You always take a risk when you side with some short-term forecasts. But we see investors make the same mistakes year after year. Stick with your plan. Stick with how you’ve put your portfolio together. Make sure there’s nothing that’ll go “bump in the night” with respect to your plan.

Contact us any time if you’d like to discuss your long-term plan in more detail.

Enjoy, Gary

Upcoming Event

Please join us for an event on January 21st discussing how to evaluate risk in today’s economy and its impact on your portfolio. We will have a three person panel addressing this very current and important topic. To reserve your place, please call (800) 480-7913 or register at www.coylefinancial.com/investing-event.

www.coylefinancial.com
800-480-7913 | coyle@coylefinancial.com

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