Be wary of New Year forecasts: van Eyk
Financial advisers and investors should be wary of New Year market and economic predictions, according to van Eyk's head of strategic research Jonathon Ramsay.
Ramsay said New Year predictions were no more relevant than predictions made at any other time of the year.
"There's no inherent reason why the experts should be better at predicting the future now than they are at any other time of the year.
"One needs to be careful that someone's holiday reading isn't allowed to set the agenda for the rest of the year," he said.
Those prepared to be judged on their 2012 predictions were more credible than those that "wiped the slate clean" Ramsay said.
He said the process of forecasting themes that would shape markets in 2013 forced analysts to refocus their views. This could be beneficial to advisers if they understood how to use these forecasts properly.
Ramsay offered advisers and their clients a number of tips on using predictions.
He said advisers should avoid trying to clutch at opinions that confirmed the validity of previous year's investments.
"With so many views flying around there is something to suit everybody's prejudices," he said.
Although it was easier to talk to clients about big, tangible market themes, Ramsay said such themes did not always translate into market performance. He said many of the most prominent themes had already been priced into markets.
"Having a strong valuation process and discipline can help identify which themes are the most fully discounted by the market," he said.
Ramsay said having a rigorous approach to asset valuation could help identify which outcomes matter most. It was important to assess themes and predictions in terms of the probability that they will be correct — and what would happen if they weren't.
van Eyk cited its prediction of a euro break-up in 2012 as an example of pessimism priced into the market.
Recommended for you
Bell Financial Group has appointed a chief investment officer who joins the firm from Clime Investment Management.
Private markets funds with “unattractive practices” could find themselves facing enforcement activity with ASIC chair Joe Longo stating he cannot rule it out in the future.
Despite ASIC concerns about private credit funds being accessed via the advised channel, there are questions regarding how high its usage actually is among financial advisers.
Challenger has looked to the superannuation industry for its appointment of a group chief investment officer, a newly-created role.
