In last Monday’s edition of the Press & Journal, Carbon Investment Director, Barry O’Neill provides a timely warning about the usual barrage of forecasts and predictions around the investment markets at this time of year.
As Barry rightly points out, there are simply too many unknowns to have any confidence in short-term predictions. It is these unknown events that shape where the markets will be in the future.
In fact, the truth is that wherever they are they will almost certainly be fairly priced at that moment in time because Market participants, both buyers and sellers, agree every day on a price point at which they are prepared to transact. Barry cites the global financial crisis of 2008 as an example of a time when the overwhelming uncertainty about the future led investors to want to pay much less for companies, and at the same time sellers were accepting much less in return for liquidity and the chance to retreat to the perceived risk-free asset – cash.
As Barry says, the best thing investors can do is to accept the market price as an accurate reflection of market participants’ feelings about all of the publicly available information. His advice is to own a well-diversified portfolio not overly exposed to any single company, sector, country or asset class. He also rounds off with a very relevant quote from the famous North American economist, John Galbraith who said: “There are two kinds of forecasters; those who don’t know and those who don’t know they don’t know”.
It is worth reading the whole article, which you can see here.
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You can view Barry O’Neill’s profile here.