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Vultures and Market Predictors

When you visit most any popular investing website, there is a high likelihood your eyes will hone in on a catchy tagline for an article predicting which direction the stock markets are heading next.  Just as likely is that there will be a second article on that exact same page with an equal and opposite prediction (hopefully not by the same author, but that wouldn't be a complete surprise).  Why does this occur, and why do sites promote these mixed messages?

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Simply put, these types of headline generating predictions are a popular fixture because they cater to maybe the two most powerful internal motivators in human beings: fear and greed.  Most every investor would like to believe that latest bit of information will give them an edge in avoiding the next market correction, or participating fully in the next market boom.  Unfortunately these articles also bring out the worst in proper portfolio management, as they cultivate an environment that promotes market timing, which has proven time and time again to be a fools game.  J.P. Morgan does a good job of illustrating the discrepancy in returns of the average investor versus the overall market (below).  A major reason for this underperformance is the tendency for investors to (unsuccessfully) try and time market movements.

J.P. Morgan Guide to the Markets 2Q 2017

J.P. Morgan Guide to the Markets 2Q 2017

On the flip side, the authors writing these articles love making bold market predictions (without ramifications, unfortunately) because they know that they will eventually get a prediction right.  When that day does happen they will then pound their chest and write a book about their brilliance, cashing in at the expense of others.  Ben Carlson wrote an excellent piece of this exact point, highlighting the absurdity of one of the industry's most notorious violators.

Therefore, I ask each of you to not give into fear or greed, but instead, stick by a disciplined investment approach where the odds lie in your favor.  No one really knows where the markets are headed tomorrow, next week, or next year.   If someone claims they do, tune them out.  Let those market predictors cry wolf all they want and be vultures to someone else's wallet; just not yours.