At Stoic, we're amazed almost daily by financial experts who still believe their own stock market predictions. Apparently, using a crystal ball is still commonplace in the financial world. Yesterday (September 2nd), we saw another prime example of this, in the FD, of all places.
In this article (in Dutch) in the FD (titled "If the stock market crashes anyway, what can you do?"), Joost van Leenders, investment strategist at Kempen Capital Management, is interviewed. He states the following:
If we really had indications that a stock market correction was coming, we would sell some of our holdings. However, that doesn't look likely now.
It's this kind of fortune-telling that's repeatedly refuted by research. Because no one is able to consistently and accurately predict stock prices, active investors across the board perform far worse than passive investors. There's only one certainty in the stock market: that the global economy will always grow in the long run. Period. And that's precisely why passive investing (simply getting in and then not trading again) is guaranteed to be the best investment strategy. Anything else is, at best, relying on clues, but essentially gambling.
The FD editor then correctly states in the article that "a crash can always happen." That's indeed what happened in 2020, 2008, 1987, 1929, and 1882: the economy collapsed and (almost) no one saw it coming, with all the disastrous consequences that entailed. Fortunately, the stock market fortune tellers have an answer to this as well.
“According to experts, a crash is actually an excellent time to buy extra shares.”
With such logic, even a crystal ball is unnecessary. After all, a rising stock market is good for returns, but a falling market also offers wonderful opportunities. So, the fortune-tellers win when it's heads, but so do the tails.
