Working in personal finance, the start of any year means loads of invites to ‘Outlook 2021’ style events where fund managers and insurance companies tell us what to look out for in 2021. A good thing to come out of Covid 19 is these events have moved online so if they have an interesting speaker, I can listen to them from the comfort of my office and do other things at the same time. But how useful are these things at all?
Next to useless is what I would say. I read on another blog this morning of the study carried out by Professor Philip Tetlock of the University of Pennsylvania on the accuracy of predictions made by experts in a number of different fields. He started this research in the mid-1980s and in 2005 he concluded that the expert predictions were statically indistinguishable from random guesses.
I thought it would be fun to have a look back at 2020 and see if we could have predicated any of what happened:
2020
News comes out of China that there is an epidemic that started in a city called Wuhan. Most of the western world didn’t give it much attention as this isn’t the first time there had been a virus in Asia and it had always been contained to that region.
Global supply chain shuts down as production in China stops. Stocks plummet 33% in just one month (it took 12 months for markets to fall that far in 2007/08).
With unemployment rates reaching record levels, lots of businesses closed and everyone else working from home, the stock market starts to rise.
Bankrupt car hire company Hertz sees its share price rise by 365% in 5 days.
Donald Trump is comprehensively beaten in the US presidential election yet refuses to concede defeat (ok, I think lots of people could have predicted that one!).
I know this happened in 2021 but I’m going to throw this one in here. The US Capitol is stormed by Trump supporters. The S&P 500 is up for that day.
The UK ended their transition period following them leaving the EU with a last minute deal that was agreed on Christmas Eve.
2021
So what will 2021 hold. It is a brave person who will try to predict what is going to happen but there are things that happened in 2020 that we know will continue into 2021.
There will be a lot more IPOs. Roblex (kid’s online computer games, my daughter absolutely loves it) delayed their IPO following the high valuations of use food delivery service Door Dash and Airbnb. They are going to review their own valuation before going to the market. We will also see payment system Stripe go public too as well as a host more companies. The trouble with so many tech companies going public is weeding out the good from the bad and there will be a lot of unprofitable companies going public next year that will lose you money.
The impact of Brexit will also be felt in 2021 as the added time and cost of completing forms and checks is felt. We have already seen the pictures of the empty shelves in Marks & Spencers and videos on twitter of the fishermen who can’t sell their catch to the EU. How big an impact it will have it dependent on the efficiencies of the checks at borders. As well as the UK government’s failure to prepare, we also have to remember that there has been no custom checks for over 40 years so neither the Irish, British or the French have the staff with the required experience as it simply wasn’t needed.
Covid 19 will continued to have an impact on the global economy. Vaccines were announced in November but as we can see, the approval and distribution process for medicine is slow. Ireland are hoping to have 4 million people vaccinated by the end of September. That’s another 9 months!
Investments
What is the prediction for your money for 2021?
Keep doing what you are doing, investing in quality companies and bonds.
Keep enough money on deposit so you have cash available if you need to access it.
Keep an eye on your goals and end date. If your money is invested in a pension that you won’t access for decades, don’t even worry about it. If you will be accessing your money in the next few years, you need to be looking at your exposure.
Because as 2020 has shown us, it is absolutely impossible to predict what is going to happen in the future.
