Predictions That Went Wrong

“I KNEW IT WOULD HAPPEN”

In the early 1970s two eminent American Psychologists conducted a survey about how people would remember their predictions about important forthcoming events. The subjects taking part in the survey were asked to write down a specific probability for each of 15 different outcomes. When questioned after the outcome was known, the subjects flattered themselves hopelessly and systematically misremembered what they once believed. They adopted the approach “I knew it would happen” but in fact in most cases the memory of their predictions was skewed by the eventual outcome.

This acts as a reminder of what a difficult task we face when we try to make big picture macroeconomic and geopolitical forecasts. The world is a complicated, often chaotic, place which makes predictions challenging. For many of the things that interest us, there is a substantial delay between the forecast and the outcome and this delayed feedback makes it harder to learn from our successes and failures.

Here are some of the popular predictions that have failed in recent years:

The UK would vote for “Remain” in the Brexit Referendum.

The UK would enter a recession immediately if it voted to “Leave” the EU.

Donald Trump would not become President of the USA.

Narendra Modi would not become Prime Minister of India.

Narendra Modi’s economic reforms would fail.

Theresa May would have such a resounding victory in the 2017 election that Labour would disintegrate.

Angela Merkel would sweep to victory in the German elections.

President Trump’s tax reform bill would not be passed by US legislature.

2 years ago, when the oil price was $30, a well know investment bank forecast it would halve again to $15 since which time it has risen by more than 140%.

6 years ago, the US S&P 500 index was 1260 and during that time, financial commentators have repeatedly predicted a stock market crash. The index has more than doubled since then.

The price of Gold reached $1889 per ounce in late 2011 and at that time a well know US investment bank predicted the price would double to $4000 within the following two years. Since then the price has been falling steadily to the current level of just less than $1300 per ounce.

All this goes to prove that forecasting is more and more difficult than ever before.

A sound financial plan and lifetime cash flow strategy is the only safe way to navigate uncertain times. At every life stage, advice can help you to optimise your assets in the medium to long term.

Clarion Wealth excel in this field ensuring clients can enjoy both their wealth and life to the full without having to worry about forecasts.