Sunday, December 19, 2010

'Tis the season for top ten lists and financial prognostication

Year’s end is a time for publishing top ten lists covering topics such as the best movies, books, music, sports teams, weight-lose techniques, and New Year’s resolutions. In the world of investing, it is also the season for financial prognostication. Among the most frequently discussed predictions are those addressing how the S&P 500 index will perform in the coming year. For 2011, all major Wall Street strategists have a positive outlook for the S&P 500’s performance, with targets ranging from a low-end 1.2% increase to a high-end performance of 10%, based on this past Friday’s market close.

MY TAKE: Financial and economic forecasting remains a dismal science with little data supporting their accuracy. However, Wall Street strategists are not uniquely challenged in this regard. Projections from organizations such as the World Bank, the International Monetary Fund and the U.S. Department of Commerce’s Bureau of Economic Analysis suffer similar challenges. Bottom line - Most investors remain hopeful for the future, but are cognizant of the economic challenges facing many major economies. Similar to top ten lists, financial and economic predictions are always great topics for debate. The year ahead will provide us with much to consider.

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