The Prosperous Pound

When you look at investment performance with the benefit of hindsight, you may think you could predict how markets will move. Yet, markets are unpredictable and expert forecasts prove how difficult timing the market is.

Every investor has heard the advice “buy low, sell high”. So, it can be tempting to try and guess how investments will perform in the short term to make the most of your money. But history shows us that trying to time the market is impossible.

Even experts who have far more resources at their disposal sometimes get it wrong, so trying to predict the market and economy could mean you miss out. Here are five examples of when expert predictions completely missed their mark.

1. 1929: The market has reached a “permanently high plateau”

Irving Fisher is considered one of America’s greatest mathematical economists.

Despite concerns the UK will face a recession in 2023, the FTSE 100 hit a record high in February. Read on to find out what influenced the market and the valuable lesson investors can take from the news.

The FTSE 100 is an index comprised of the 100 largest companies listed on the London Stock Exchange. On 3 February 2023, the index hit a new high of 7,906.39 and exceeded a record set almost four years ago in May 2018. Just days later the FTSE 100 surpassed the magic 8,000 barrier, setting another new record.

After a difficult few years, due to the Covid-19 pandemic and war in Ukraine, it was good news for investors.

But the timing may seem a little strange. After all, pick up a newspaper and you’ll find stories about the cost of living crisis, high inflation, and the risk of the UK falling into a recession this year.

High inflation means retirees could need to increase their budget by almost 20% to maintain the same lifestyle, research suggests. If you’re drawing an income from your pension, it’s vital you understand whether withdrawing more is sustainable.

The UK experienced high inflation throughout much of 2022, and inflation remains above the Bank of England’s target of 2%. This has stretched many household budgets, but retirees may find it more difficult to weather a period of high inflation.

As your income may not increase, or you deplete assets more quickly, you could face more financial uncertainty later in life.

A retired couple needs an annual income of £34,000 for a “moderate” lifestyle

The Pensions and Lifetime Savings Association (PLSA) has updated its Retirement Living Standards to reflect recent high inflation. It found that some retirees will need to increase their budget by 19% just to maintain the same standard of living they enjoyed at the start of 2022.