DON’T LET PREDICTIONS cloud your thinking. When my husband and I first started investing, that was the wisest advice we received. You know the sort of predictions I’m talking about: “It’ll be a bad year for the stock market, so you should pull all your money out,” or “bitcoin is going through the roof, so stock up now.”
Last year, I decided to make a note of some of the predictions I read, and put them in my followup file for the beginning of this year.
For instance, a year ago, The Wall Street Journal asked its readers where the Dow Jones Industrial Average, S&P 500, 10-year Treasury note and bitcoin would finish 2022. They predicted the Dow would end the year at 36,853. The actual finish was 33,147.25, or 10% lower. The prediction for the S&P was way off. Readers were expecting a 6% gain, but instead the S&P finished down 18%, including dividends. They thought interest rates would be 2% when they were closer to 4%. Then there’s bitcoin, which fell 64.3% to below $17,000, nowhere near the year-end price of $53,900 that readers predicted.
To be sure, these were readers, not financial experts. But the experts didn’t do any better. The ones I read included a local Philadelphia investment firm, an online financial blog and a financial newsletter. They all predicted the Dow and S&P 500 would be up in 2022. They also predicted there would be four interest rate hikes by the Federal Reserve. There were seven. What did the experts get right? Bitcoin. They all said it would tank, and it certainly did.
How did 2022’s tumbling markets affect my husband and me? Happily, we were down a lot less than the S&P 500, thanks to some good financial advice and our conservative investment tendencies, including an emphasis on dividend-paying stocks. The interest rate hikes mean we’re now actually making some money on our cash. We’re also still ahead on the bitcoin we bought, but I consider that pure luck. What about the two other cryptocurrencies we bought? Let’s just say they’ll help offset some capital gains.