Back to the Future...If We Only Knew

Jeff Karp |

By Jeffrey R. Karp, CLU, ChFC, CASL™

I read an article the other day that sighted a Danish proverb, “it is difficult to make predictions especially about the future.”  I must admit that I did not go and research whether such a proverb really exists or if indeed it was Danish, regardless the meaning in the message is pretty clear.

As we enter the 4th quarter, the pundits who make financial predictions are out in droves.  A quick recap of 2015 shows a year where, so far, many predictions have not materialized.  Let me give you a few examples; expectations were for a 5-9% market return and it looked doable for the beginning part of the year.  Third quarter performance has put this prediction in jeopardy, but as Yogi Berra said, “It ain’t over ‘til it’s over.”

Another example is the European QE, initiated in March 2015.  Expectations were for Europe to come roaring back as easy money would help their economy.  While there are signs of improvement and positive expectations, results are not in yet.  My last example is the constant debate over when the Federal Reserve Bank (FED) will raise interest rates.  This one is the most interesting to me as I believe that this debate seems to move the markets the most and will probably have the least short term impact of the three examples.  It also sends completely opposite messages as the FED would only raise rates if they feel the economy is strong enough, yet everyone is worried about the negative impact on the economy.

Karp Financial Strategies is in the process of re-allocating portfolios for the 4th quarter to try to take advantage of potential returns, keeping in line with the investment objectives of each of our clients.  Yes, we will take a position on how we think each of these, and other, economic factors will influence the outcome.  And yes, we do research, seek expert opinions and look for trends to follow.  How will it play out?  Please refer back to the proverb above.

One last note to those at or near retirement; if you have taken the time to put together a financial plan that projects your base retirement income using financial assumptions (life expectancy, inflation, social security, investment returns, etc.), please remember the proverb above as you are trying to predict over a very long time period. 

Now, let me make a prediction.  At points over the next 25 to 30 years, your plan will look like you are perfectly on track and will never run out of money.  At other times, your plan will look like it is behind your goals.  Remember to make the necessary adjustments, based on the present events, and once again, remember the proverb above.

Note – In the movie, Back to the Future II released in 1989, the Chicago Cubs won the 2015 World Series.  Did the script writer know something?

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.