Apprise’s Five Favorite Reads for the Week of January 10, 2021

Personal Finance

January 14, 2021
Personal Finance

On Thursday, I hosted the latest session in my “Ask Me Anything” webinar series: “Dow30,000: What's Next?” Please click this link Passcode: xZr.q&6E if you would like to view the recording.

I hope 2021 has started off well for everyone. If you haven’t noticed, I have made some changes to Apprise’s content offerings over the last few months. Going forward, I will publish “Apprise’s Five Favorite Reads” on the second and fourth Fridays of the month. On the first and third Fridays of the month, I will share original content -- written or video. I will host Apprise’s “Ask Me Anything” series  on the second and fourth Thursdays of the month. There may be other content as the year progresses as well.

As we start a new year, investors wonder what lies ahead for the markets. You can find many market forecasts. As a rule, you should ignore them. Making accurate forecasts is hard. When it comes to the stock market, making predictions can be a futile exercise. Market forecasts are typically wrong. Often by significant amounts. This week’s first article provides some data showing how bad market forecasts can be. The following two quotes sum up my feelings on forecasts quite well:

· “It's tough to make predictions, especially about the future.” Yogi Berra.

· "We've long felt that the only value of stock forecasters is to make fortune tellers look good." Warren Buffett

Market performance in 2020 was volatile, to say the least. At its low for the year, the S&P 500 was down 33.9%. Despite the global pandemic - and much to the surprise of investors and market prognosticators alike - the market quickly recovered from its lows. For the year, the S&P 500 was up 16.3%. Quite an impressive showing.

Despite the uncertainty associated with the upcoming change in political leadership and the continued impact of the pandemic, the S&P is up 1.1% in January as of Thursday’s close.

Click here for a video overview of this week’s content.

Here are the links to this week’s articles as well as a brief description of each:

1.  Clueless About 2020, Wall Street Forecasters Are at It Again for 2021. Wall Street forecasters are notoriously bad at their craft. I can’t forecast what the market will do this year, you can’t, and they can’t either. I doubt you can find even one person that forecast the S&P 500 would hit an all-time high in mid-February only to be more than 30% lower about a month later. I haven’t read a word about the amazing prognosticator who got those two forecasts right. I haven't heard about anyone who predicted the market would reach a new all-time high in mid-August either. Why? Those individuals don’t exist. In December 2019, the median consensus on Wall Street was that the S&P 500 would rise 2.7% in 2020. That was way off, too. The S&P ended the year up 16.3%. From 2000 through 2020, the median Wall Street forecast missed its target by an average of 12.9%. Your best bet is to put together a financial plan. Then work toward achieving the goals you set out in your plan. If you would like some help with your financial plan, please schedule a call.

2.  How to Achieve Your New Year’s Resolutions, According to Psychology. In January we are reminded to make New Year’s resolutions and set goals. We keep some. Others fall by the wayside within days. Motivation, temptation, and achievement can help make your new routines work. If you’d like yours to stick, read on. This article shares 10 findings that could help make your New Year’s resolution stay last all year. You can find another tip in this article: Why Small Habits Make a Big Difference.

3.   Something of Value. I regularly share memos from Oaktree Capital’s Howard Marks. He’s one of my favorite investors. I never fail to learn something when I read or listen to what he has to say. Given the present market environment, I think this might be his best memo ever. Over the last decade, growth stocks significantly outperformed value stocks. Marks shares his views on the art and science of value investing, especially in the context of today’s increasingly efficient and complex world. I found the shared exchanges between Marks and his son quite insightful. Should value and growth be viewed as mutually exclusive. Perhaps not. Read on to find out why.

4.   The Big Rocks and the Jar: A Lesson in Making Priorities. When working on financial plans with clients, I schedule life planning discussions to help set priorities. This parable reminds us why we should start with the most important things.

5.   Why Markets Boomed in a Year of Human Misery. Last year, the economic and political backdrop were quite challenging. As a result, many investors questioned the market’s strong performance. We are often reminded that the stock market is not the economy. The Fed’s actions and the stimulus helped. Other contributing factors included increased savings by white-collar workers and a much lower-than-expected decline in total employee compensation. Confused? Check out the article.

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