It’s a new year and that will mean new investment predictions are made by the biggest investment managers around the globe.
If you are planning to retire in the next few years, then hopefully you realise you need to invest your savings to ensure your money doesn’t run out in retirement before you.
Millions of people around the world will look out for these predictions with interest as they worry whether now is the time to be investing their savings or if they have already, should they be selling their investments to avoid impending doom.
You may think, the bigger the investment manager the more likely they have their finger on the pulse. They surely understand what the markets are going to do next.
But just how accurate were their predictions in 2023 and should you be listening to them?
How did investment predictions for 2023 fare?
At the end of 2022 there was much talk of a recession for both the US and the UK in 2023. High inflation, rising interest rates and the media constantly mentioning the ‘cost of living crises’ would force even the most hardened optimist to worry.
There was no recession in the US or the UK in 2023 though.
In fact, both economies grew stronger than the International Monetary Fund (IMF) predicted.
In terms of stock markets, the US market (S&P 500) closed at the end of December 2022 at a price of 3,839.
Here is what five of the biggest investment banks predicted the price would get to by the end of 2023:
- Barclays 3,675
- Morgan Stanley 3,900
- UBS 3,900
- Citi 3,900
- Goldman Sachs 4,000
Most of them predicted little or no growth at all.
The final price at the end of December 2023 was actually 4,769, a 24% increase!
We use the US stock market as an indicator for global returns as around 50% of the world’s capital is invested there. It contains the seven biggest businesses in the world. It will drive most of your portfolio’s return if you invest globally.
So, the big investment banks were wrong in their predictions.
Even the IMF, the major financial agency of the United Nations, was wrong.
This actually happens quite often because there is no way to predict the stock market or the global economy in the short term.
It could be said that 2023 saw quite a few negative events:
- Silicon Valley Banking collapse leading to a number of other banks going bust including Credit Suisse.
- An attempted coup in Russia.
- Continuation of the Russia/Ukraine war.
- Attacks on Israel and start of the Israel-Hamas war.
It would be understandable for someone to think 2023 was not the time for investing your hard-earned retirement savings. However global stock markets had a great year. If you didn’t invest at the start of 2023, you missed out on some great gains.
It may mean you also need to change what type of news you read as there were also lots of positives from 2023:
- Advances in Artificial Intelligence.
- Finland becoming the 31st member of NATO.
- World Health Organisation declares end of COVID-19 global emergency.
- Chinese President Xi Jinping meets US President Biden in first US visit since 2017.
If you follow the news too closely you will probably always be uncomfortable about investing and will never get round to it. There will always be negative news and events that ensure forecasters incorrectly predict dire consequences for stock markets.
Facts to focus on in 2024
Investment predictions for the year ahead are not worth the paper they are written on.
Instead focus on these facts:
- Loss of purchasing power is going to be your biggest risk in retirement as prices rise two to three times over a 30-year retirement.
- Over the last 100 years on average, global stocks have returned twice the rate of bonds, three times the rate of cash and most importantly, three times the rate of inflation.
Look up the price of the S&P 500 on the day you were born, now compare this to today’s price.
Let’s even do it for just the last 30 years as this is the average length of a two-person retirement.
The price of the S&P 500 at the end of 1993 was 468.
The price at the end of 2023 as we saw earlier was 4,769.
No that is not a typo in the 1993 price, that’s the difference 30 years of innovation makes.
The stock market has never permanently declined. The declines are temporary, but the advance is permanent.
The best time to invest was 30 years ago. The next best time is today.
If you would like to understand your retirement number, the amount you need to save for a successful retirement, then please get in touch for a free no obligation 15-minute call. We would be happy to review your position, explain where you stand and what you need to do to get the outcome you desire. We have created hundreds of happy and protected retirements over the years. This could be you too.
Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.