Wouldn't it be great if we could turn to expert to tell us where the market is going for the remainder of 2008! Well the Weekend Australian Financial Review, 24th to 27th April, tried to do just that. They canvassed the views of 8 leading economic and investment experts from some of the the well known organisations in the investment world - ABN Amro, AMP, Citigroup, CommSec, Credit Suisse, Morgan Stanley, Ord Minnett and the Russell Investment Group. Surely putting together the thoughts of these industry experts should provide a pretty clear picture of things going forward.
Well, unfortunately, the forecasts made by the market experts painted an anything but clear picture. They were asked to provide a forecast for the S&P/ASX200 as at the 30th of June and 31st of December. The forecasts for the 30th of June, two months away, ranged from 4,913 to 6,100. (As of yesterday, the ASX200 sat at 5,797.7) The forecasts for the 31st of December ranged from 5,000 to 6,800.
So what to make of this? In all probability, one of these experts will go very close to getting in right but which one? For us it clearly shows the difficulty in forecasting what markets, yet alone individual shares, are going to do. What hope does the average investor have if market experts, who spend most if not all of their working days pouring over the data, can't get close to consensus for a period as short as two months?
A much better approach is to have a long term outlook based on the fundamentals of capitalism and how markets work, have a well diversified portfolio of cash, fixed interest securities, Australian shares, international shares and listed property and then hold these into the future. Then you can sit back and watch from the sidelines as the experts differ between themselves with most getting their forecasts wrong.
Have a great week,
Scott Keefer
