Dec. 26, 2013, 8:30 a.m. EST
Making sense of year-end investing ‘advice’
It’s foolish to invest solely on financial predictions
The problem with listening to year-end roundups and year-ahead financial forecasts is that someone will be right, most will be wrong and all will be forgotten by everyone but you long before the year is out.
It’s not that making predictions is a fool’s game; it’s fun, and it distills an expert’s thinking down to something easy to digest. The foolish part is acting — investing — based solely on those forecasts.
That has never been more clear to me than this month, when my show “ MoneyLife ” has had a run of tremendous guests, all of them talking about the year ahead and none of them in real agreement over what happens next.
Grace, a 40-something listener from Tacoma, Wash., who has been taking greater charge of her finances since going through a divorce two years ago, wrote that each guest has been smart and sounded great, but that the abundance of advice had left her confused about what to do next.
“If I only listened to one show, I could have come out thinking, ‘Yup, that’s a good expectation for what’s going to happen and how I should act,’” she wrote, “But since I listen every day, it all sounds good, but I can’t decide who to believe is right.”
It started with Jim O’Shaughnessy of O’Shaughnessy Asset Management — author of “What Works on Wall Street” — suggesting that anyone who needs yield and income will want to look at global high-dividend stocks, because they won’t find that income in 10-year Treasurys, and domestic dividend plays have been bid up.
Next, it was David Lafferty, chief investment strategist at Natixis Global Asset Management, suggesting that volatility would be up for the first quarter of 2014 — and possibly the first half — but noting that investors with reasonable expectations should ride it out to reasonable single-digit gains for the year.
Brian Sullivan, chief investment officer at Regions Investment Management, said he expected that the Federal Reserve’s actions had already been priced into the market, so that investors should not expect the after-effects of tapering to bite into the uptrend, while Steve Scruggs, manager of the Queens Road Funds contradicted that by suggesting that there will be adverse effects to the market and the economy as the central bank decreases its financial support.
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Scott Wren, senior equity strategist forWells Fargo Advisors, is nervous that the market’s recent rally is eating into returns investors might have expected from 2014, which should make the 12 months ahead feel worse than he might have expected at the end of the third quarter.
John Herrmann, the rates strategist for Mistubishi UFJ Securities, was far more bullish about the economy than most, suggesting that the broad economic numbers have been misleading and the economy’s underpinnings are much stronger than most people believe.
On the other hand, Peter Schiff, chief global strategist for Euro Pacific Capital, is one of the loudest bears around, and he was growling about how investors need to overhaul their investment strategy or risk getting mauled by what lies ahead.
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