The Impact of Financial Forecasting and Market Corrections

Investors’ decisions are mostly based on financial predictions made by so-called experts. So, when the news broke that we were about to enter a pandemic, investors and advisors were in shock. How do investors move forward when modern society is suddenly afflicted by an uncontrollable peril like COVID-19?

In this episode, Doug and Greg talk about the risks of poor financial forecasting, the truth about market corrections, and the true indicators for smart investing practices.

Key Takeaways

[02:03] - Why is forecasting in finance becoming a nightmare?
[03:47] - What forecasts and projections really tell you.
[05:47] - Omicron’s impact.
[09:52] - How COVID-19 has been affecting investors’ and advisors’ daily lives.
[12:30] - Why is it impossible to forecast in finance?
[15:29] - Why the bond market is always the best guide.
[17:11] - Two factors that affect inflation.
[18:36] - Why corrections are normal.
[25:10] - How forecasting works in sports.

Quotes

[10:26] - “This has been such a shock to society, especially a society that's been used to general comfort throughout life. I think if this would have happened 100 or 200 years ago, people would have just dealt with it and moved on. But now we're basically protected from most dangers in the world and modern society. And so having an uncontrollable danger like this is a complete shock to the system, and I think it's going to take time to come out of it. And I'm hopeful sooner rather than later.” - Doug Stokes

[12:35] - “It's impossible to forecast what's going to happen in the future. We were in the trenches dealing with human psychology and individuals that were dealing with some very stressful situations in March of 2020, and nobody could've forecasted that we were going to run into a pandemic.” - Greg Stokes

[22:17] - “As an investor, if you can't take the 10% or maybe even 20% correction in stocks─because it's going to happen statistically once every year with 10% and once every six years at 20%─then what's your alternative?” - Doug Stokes

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The Impact of Financial Forecasting and Market Corrections

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