There are certain things that are synonymous with the new year. Resolutions are certainly one of them, which most likely explains the sudden increase of people going to the gym in January. Another popular fad is predictions, more specifically, predictions on how the stock market will perform in the coming year.

 
jp valery GJpsFyNSQGI unsplashI’ve been in the financial services industry for two decades and each year, I see forecasts from experts on where the market index will finish at the end of the year. And every year, many of them are wrong. Just think of all the “doom and gloom” articles you’ve read at the beginning of last year regarding the economy and the markets. It turns out that 2019 was an excellent year for the stock market.


You don’t have to look too far nowadays to find stock market predictions for 2020. Just write “S&P/TSX Composite Index outlook for 2020” in your favorite search engine and see what pops up. You will find predictions that fall within one of these three conclusions: decrease, increase or relatively flat. This covers all the bases. If you really want to dig in to the subject, look for predictions from past years and compare with actual results. While some predictions turn out to be fairly accurate one year, the same expert is rarely correct on a consistent basis.

One recent poll of portfolio managers and strategists revealed very different opinions on the outlook for 2020 for Canadian equities. Of the 26 participants in this pollten of them forecast an increase of more than 5% while five experts forecast a decrease of more than 5%. The rest see the market moving within the range of -5% and +5%. Who will be right? We will only know at the end of December. 

This is not to say that the portfolio managers, economists and strategists that participate in these polls are not good at their jobs. It is simply a reminder that no one can predict accurately how stock markets will perform over short periods of time (yes, one year is short-term). Your investment strategy should not be dictated by these polls. Trying to time the market rarely works out, if ever. 

Focus on what you can control 

Instead of trying to predict which type of investment assets will generate the best return this year, establish an investment strategy that will take into consideration your financial situation, goals and risk tolerance, then stick to it. Developing an investment policy statement will go a long way in helping you stay on course and not chase performance. Also, since no one can predict, let alone control, market performance, focus on the things that you can control to ensure you improve your financial situation and meet your goals. These include spending habits, savings strategies, investing in quality companies and products, putting a financial plan in place, having proper insurance protection and taking advantage of tax planning opportunities when available. Your financial planner or advisor can help you with this. 

Best wishes to all for a prosperous 2020! 

The above was an article by Marc-André Castonguay, CFP, CIM for Brunswick News published January 11, 2020