Prediction Season

In one of our newsletters from October, we included an article entitled, “Presidential Elections and the Stock Market”. The conclusion of the article was:

Trying to make investment decisions based upon the outcome of presidential elections is unlikely to result in reliable excess returns for investors. At best, any positive outcome based on such a strategy will likely be the result of random luck. At worst, it can lead to costly mistakes. Accordingly, there is a strong case for investors to rely on patience and portfolio structure, rather than trying to outguess the market, in order to pursue investment returns.

Near the end of every year - and especially during presidential elections - we enter into what we like to refer to as Prediction Season. This is where we reach a fever pitch of predictions coming from so called financial experts explaining how you need to change your investment strategy to deal with the “new” economic environment. The changes that they recommend are rarely helpful, and study after study has shown that these “experts” demonstrate no statistically meaningful degree of accuracy in their predictions. Dimensional Fund Advisors has a great article about this entitled, “Prediction Season” which we’ve attached for your review. We encourage you to take the time to read it.