The Week Ahead: Market predictions fill the air

December 21, 2013 

Props to the investment strategists at Morgan Stanley. Among Wall Street pros a year ago, they had one of the most optimistic predictions, guessing the Standard & Poor's 500 index would rally to 1,733 by the end of this year. For that to come true, the index would have to fall about 4 percent from recent levels. Instead of Morgan Stanley's bullish case for the index to rise 21.5 percent this year, it's up more than 26 percent.

As it has been said, the difficulty with predictions is that they are about the future. And investing (and prognostication about markets) is about the future. A year ago Bank of America figured gold prices would rise to $2,000 an ounce by this time. That wasn't going out on a limb last December, when gold was over $1,600 and had risen every year for the past 12 years. But instead of following Bank of America's projection, gold prices have fallen by 25 percent this year. So go the financial doomsdayers and fiat currency disparagers.

Year-end predictions about investment markets like those we will see this week are not news. They fill up the time and space between Christmas and New Year's. They have little to do with the principles of long-term investing: diversification, discipline and keeping costs low.

Oh, yeah: Just to hedge its bet a year ago, Morgan Stanley also predicted the stock market could lose value in 2013. You know, because it could have.

Tom Hudson, financial journalist, hosts "The Sunshine Economy" on WLRN-FM in Miami, where he is the vice president of news. He is the former co-anchor and managing editor of "Nightly Business Report" on public television. Follow him on Twitter HudsonsView.

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