This year-end column acknowledges the limitations of traditional forecasting tools in the face of unprecedented economic volatility. While the US economy shows signs of strength and the stock market performs well, experts remain uncertain about key factors like inflation, AI's impact, and government debt sustainability.
Let me apologize in advance. This is the year-end column, the one that’s supposed to deliver bold, startling forecasts for the 12 months ahead. That won’t be happening here this year, and for obvious reasons. If the recent past proves anything, it’s that many of our standard forecasting tools are broken.The simple explanation for these forecasting failures is that the world has entered some very odd economic territory. Lingering effects of pandemic weirdness, manic exuberance around.
Yet even those strutting power brokers are in the dark on some fundamental issues. Will inflation rebound? Will AI live up to its hype? Will lenders finally balk at the growing mountain of government debt? Your guess is as good as theirs. In this zero-visibility age, we should be honest about how little we can correctly predict about the year ahead. The evidence, pro and con, was summed up in a note from Man Group portfolio manager Henry Neville. “You can make a strong argument for a very bad year and build a similarly competent case for a very good one,” he wrote. “Push me off the fence and I’ll fall for the former.”In the short term – say, the next six months – it’s hard to argue with momentum, or Big Mo. The U.S. economy is booming ahead at a 3.1-per-cent annualized pace, according to a gauge maintained by the Federal Reserve Bank of Atlanta. Earnings for the S&P 500 are poised to grow an impressive 15 per cent in 2025, Wall Street analysts declare. This ebullience should help support U.S. stocks over the next few months. It may also spill over to the Canadian market, where the economy isn’t nearly as strong but stocks are considerably cheaper than their U.S. counterparts.The S&P 500 delivered a smashing performance in 2023, notching a total return of 26 per cent. It’s on pace to deliver similarly spectacular results in 2024. Here’s the thing, though: Such back-to-back bonanzas happen just about neve
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