facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog external search brokercheck brokercheck Play Pause
What Would You Do? Limits of Foresight Thumbnail

What Would You Do? Limits of Foresight

Investing Baron Team Insights

A 30-second read by Victor Cannillo: The power of foresight is desirable but limiting. Even if you could know a future event for certain, it would still be difficult to predict market movements based on that event.

For example, say at the beginning of the year I would have told you that during the year there would be a global pandemic and economies across the world would shut down. Do you think that information would have influenced you to sell some stocks?

And what if I told you that Pfizer would be the first company to announce positive trials related to developing an effective vaccine. Would that have influenced you to buy the stock?

Both those events occurred, but the results of the stock market were surprising. Pfizer, the maker of the vaccine, had a flat stock price from the beginning of the year. But the S&P 500 was actually up 10% (as of Nov 20, 2020).

Regarding elections - since 1949, returns in the market have not correlated with which party was in power. Returns are much higher for individuals who remained invested the entire time, versus people who invested only when a Republican or Democrat controlled the White House.1

The big takeaway here is to stay the course in a well-thought-out financial plan and investment strategy that is geared toward Your Personal EconomySM.

We offer a free second opinion on your portfolio.

Please contact us if you would like to discuss how we keep predictions out of investing.

1. Data Sources:  Morningstar and Hartford Funds.  Data starts on January 1 of the year following each November midterm election.

Disclosure: This is a general communication being provided for informational purposes only.  This material is not intended to be relied upon as a forecast, research, tax, or investment advice.  Past performance does not guarantee future results.

©2020 The Behavioral Finance Network. Used with permission.