Is It Possible to Forecast The Investment Markets?

31 Jul

I think it is unrealistic to try to forecast market trends in the current financial environment – I think it is clear that the potential to both good and bad scenarios are well matched – sentiment still is the driving force – and this will and has led to wild market swings.

In my opinion if there is a definite forecast and prediction given – I would call it a “guess” – unless enough assumptions  are made – but that will make it useless in the “real world” and becomes an academic article rather than a reflection of what could happen.

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What a difference a day can make. Coming on the heels of one of its stronger performances this year, stock markets ended in the red yesterday. The market’s so-called “fear gauge,” or the VIX, spiked sharply but within the current trading range. Markets temporarily paused from their intent focus on potential stimulus, although some weak economic data did surface during the day. Several data surveys plummeted in July indicating a weakening manufacturing environment.

Around the markets
A 2% drop in JPMorgan Chase, on the back of a downgrade from banking counterpart Deutsche Bank. This erased gains stemming from positive news from the likes of Coca-Cola and AT&T. Coke announced today a reorganization of its business around three core units: Coca-Cola Americas, Coca-Cola International, and its bottling division. AT&T announced an extension of its current buyback program that would allow it to purchase back nearly 5% of its shares outstanding.

In other news, shares of Latin America e-commerce site Mercado Libre cratered 7.54% today on no news. The company, with significant exposure to potentially slowing economies like Brazil, finds itself down nearly 14.5% since the beginning of the year. Touted as the eBay of Latin America, the company has an already-proven business model, and despite its pricy valuation of nearly 37 times earnings, its predicted annual growth rate of 28.15% over the next five years makes for a pretty compelling bull thesis.


“Only mad dogs and Englishmen” would try to predict what the markets will do next. Personally, I believe in asset combining with different correlation to smooth out the returns generated with a bias to dividends, yields and including both collectives, structured products and, where needed, fixed term deposit bonds – to hopefully achieve goals and returns in the short, medium and longer term.

I believe you must follow a defined strategy, assess – review and know when to change the strategy. The art is to measure and own suitable assets based on the potential risk-reward relationship – include assets which behave differently and target specified dates.

You will see from the table above the success and failure of different asset classes from year to year – to make positive returns takes effort, focus and expertise – and then there are no guarantees.

Always review and consider your assumptions, make sure they are realistic and achievable, own assets for the right reason, do not panic buy or sell.

Remember this must be a factual exercise – always try to have full information to make these decisions and learn from your mistakes.

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