Being an investor can be emotionally challenging. If we have a bad year (like 2022), we feel uncomfortable, and even after a couple of good years (2023 and 2024), we may still worry that some of the gains made might be lost going forwards.
This emotional asymmetry, where losses are felt twice as deeply as gains, is an innate bias that has deep evolutionary roots. Sure, it’s kept us alive in our ancient past – but it can be a hindrance for investors.
January is the investment silly season; analysts, fund managers, and economists make their predictions for the markets for the year ahead. If you read these predictions, here are some pointers to bear in mind:
- Any sensible pundit should suggest a rise in stock markets as, in any given year, they tend to go up two-thirds of the time.
- As markets reflect known information into prices quickly and effectively, share prices in 2025 will only move on the release of new information, which is unpredictable!
- Predicting what will happen in 2025 is essentially a bet against the market, implying that the predicter has better information, or interprets existing information better than the market, which is highly unlikely.
The results of previous years’ predictions by the experts confirms all of the above.
As a long-term investor, you have the luxury of ignoring these predictions and the short-term movements of the markets. In the meantime, our markets forecast for 2025 is the same as it was for previous years: they will go up, down or sideways!
There is no doubt that we are living in turbulent times, from the conflict in the Middle East, Russia’s war in Ukraine, China’s struggling economy and increasingly aggressive stance towards Taiwan, to the incipient presidency of Donald Trump in the US.
So, uncertainty is the other one sure forecast for 2025.
The old saying, ‘hope for the best but prepare for the worst’ is always a good mind set for investors. So starting 2025 with the expectation of positive equity market returns is sensible.
Being invested in a well-diversified portfolio is the key defence against bad times, if they happen, along with making sure you have a robust financial plan in place. You can’t control the markets, but you can control your own personal finances.
We look forward to working with all our clients in the year ahead, no matter what 2025 brings.
This communication is for general information only and is not intended to be individual advice. You are recommended to seek competent professional advice before taking any action. Past performance can’t guarantee what investments will do in the future. The value of a portfolio can go down as well as up, so there’s a chance you’d get back less than you put in.