Frisby’s forecasts – the year-end review: I didn’t see that coming

Dominic Frisby looks back to his forecasts for 2020 and finds that predicting the future is really rather difficult, and that the one thing an investor needs is flexibility.

It’s my last Money Morning of the year, so, as is custom – perhaps not quite tradition yet – we go back to our first Money Morning of the year and review our predictions. 

Even though this is just a game, I have to say I’ve been dreading the day when I would have to write today’s Money Morning for some six months now, because in January 2020, I don’t believe the word Covid had ever passed my lips. 

It’s one thing to say I didn’t see it coming, but I’d never even heard of it to have even been able to see it coming. When it did come, I thought it would be another SARS and would pass, so I got that wrong too. So this will no doubt be my worst ever result.

What does 2020 prove? You need to be flexible

My main call from February when I saw what was going on was: get out of government money, own gold and bitcoin. It proved right; I’ve lost count of how many times I beat that particular drum, but this has been a terrific year for both, especially bitcoin. So even although my predictions are likely to have been woeful – I haven’t actually gone through them yet, so we’ll enjoy this process of revelation together – I’ve had a good year, investment-wise. I think a lot of people have. We have the money printers to thank for that. 

Circumstances change as time passes and, so, your investment theses have to as well. Hence this prediction exercise is more for entertainment than investment purposes. But it’s also a useful marker. You can go back at the end of the year and see just how much the landscape – in particular the psychological one – has changed. A quick reminder of the scoring system. I get two points for an exact hit (rare); one point for roughly right; nothing for a miss; and minus one for a howling error.

  • Prediction one was for a political change in trend: that the sceptical view of climate change “gains greater prominence, spreads into the mainstream and is, thus, more legitimised”. I’m not sure why I put that first. It’s not exactly an investment theme. No doubt, the whole argument has became more pronounced thanks to Extinction Rebellion and their antics, even if it now plays second fiddle to Covid, and we have the Tories’ Green Deal, or whatever they’re trying to call it, to eliminate fossil fuel use by 2030 (too soon in my view), so as a result the sceptical view has also gained greater prominence. But it has not really gained greater legitimacy and so I’m giving myself 0.
  • Prediction two was for gold, which began the year at $1,525 an ounce. Its bull market would continue, we said, and it has. However, I didn’t expect new highs (above $1,920), so just the one point.
  • Prediction three was that interest rates would not change by anything significant. The base rate was slashed from 0.75% to 0.1% in reaction to Covid. You could say that a 0.65 percentage point change is not abnormal. And compared to the pre-financial crisis era it isn’t. But you could also say that the UK’s key interest rate fell by more than 85% to all-time lows. So that’s 0 points.
  • Prediction four was for the US dollar. A gentle decline we said. “Currently at 96, the US dollar index goes into the low 90s (perhaps even the high 80s).” That’s exactly what it did. Ooh, a bullseye. Two points.
  • Prediction five was that the pound “finds some strength”. Specifically, it gets back into the $1.40s and €1.20s. We briefly went above €1.20 in February, and $1.36 was the high against the dollar. I’m tempted to give myself a point – but I don’t really deserve it. So zero.

Oil, house prices and taxes

  • Prediction six was for oil to go up. It didn’t. It went down. The only thing that saves me from minus one is that it’s been in a bull market since March.
  • Prediction seven was for the UK housing market to be flat. Wrong. House prices fell and then they rose. Zero points. 
  • Prediction eight was that taxes, beyond a little tinkering, won’t change. They haven’t. But I thought it would be Sajid Javid – remember him? – that wouldn’t change them. One point. 
  • Prediction nine. The FTSE 100 breaks out to new highs, we said. Wrong we were. That’s a minus one.
  • Prediction ten was that the S&P 500 would break out to new highs. It would go above 3,600 we said, and indeed it has. However, we didn’t foresee March’s volatility. So just the one point.
  • The Brucey bonus sports prediction was that Liverpool win the league, while Norwich, Aston Villa and Bournemouth go down. Three out of the four right. One point. 

So there we are. A woeful five points. This year shows, more than ever, what a mug’s game making predictions is. And guess what? I’ll be back with next year’s predictions in my next Money Morning. Have a very happy Christmas, what’s left of it.

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

Recommended

Has passive investing created a stockmarket bubble?
Sponsored

Has passive investing created a stockmarket bubble?

Over the past two decades, investors have been switching from buying actively managed investment funds to buying passive funds that simply track a mar…
28 Sep 2021
Why are people panicking about fuel shortages?
UK Economy

Why are people panicking about fuel shortages?

With huge queues forming at petrol stations around the country, Saloni Sardana looks at the reasons behind the fuel shortage and asks how long it's l…
28 Sep 2021
Why investors should beware of corporate waffle
Investment strategy

Why investors should beware of corporate waffle

When top executives try to retreat behind impenetrable jargon, investors should be very sceptical, says John Stepek.
28 Sep 2021
Ensign Group: profiting from US private care
Trading

Ensign Group: profiting from US private care

Nursing and care-home specialist Ensign Group should thrive as Americans age. Matthew Partridge picks the best way to play it.
28 Sep 2021

Most Popular

A nightmare 1970s scenario for investors is edging closer
Investment strategy

A nightmare 1970s scenario for investors is edging closer

Inflation need not be a worry unless it is driven by labour market shortages. Unfortunately, writes macroeconomist Philip Pilkington, that’s exactly w…
17 Sep 2021
What really causes inflation? Here’s what prices since 1970 tell us
Inflation

What really causes inflation? Here’s what prices since 1970 tell us

As UK inflation hits 3.2%, Dominic Frisby compares the cost of living 50 years ago with that of today, and explains how debt drives prices higher.
15 Sep 2021
The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021