Index thoughts.

In many ways it is fairly easy to predict things in the future. Certain trends have a sense of inevitability about them lead to fairly reliable predictions. We don't always see, or understand these trends, but when we do see them and understand them, it makes a future situation inevitable.

However, knowing that is often of very limited use in the short term. It has been clear since at least the 1970s that at some point in the future we will run out of oil. However, that is potentially a distant outcome and if in 1970 you had invested in that outcome, you would have potentially lost a lot of money, and then potentially made a lot of money, with a lot of uncertainty yet to come. The inevitability of oil becoming scarce is not immediate enough to dictate short term behavior.

Similarly, the US economy is going to recover. Whether it has already started to recover, or if recovery will be delayed for a period of time, it will inevitably recover. In the meantime, many investments will have up and down periods.

So, when you listen to economists giving predictions, the reliability of what they predict in the near term is extremely uncertain. Generally, assuming they accept the same data, in the long term their predictions will end up being very similar. It is what is going to happen next month, next year, that is uncertain.

If you can ignore short term fluctuations, you can invest in very long term trends that will ultimately pay off. If you consider the stock market, the simple fact is that over its long history, it has gone up on average approximately 6% per annum. However, this rise is terribly unsystematic with periods of much higher than average growth followed by periods of malaise or decrease. In 1960 the S&P 500 was around 60. It is now around 1050. Of course, we are coming off a period where is has dropped from its highs by 33% and if you had measured it at that point the return would have been somewhat higher. Of course had you measured it at the March lows it would have been worse.