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Market Commentary: Hope is not an investment strategy

Jan 23, 2024 | Billy Fort


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As 2023 came to a close, many economic forecasts proved incorrect. Moving into 2024, we will continue to seek out long term opportunities based on solid business fundamentals.

John Kenneth Galbraith, the famous economist and academic, once notably quipped: "The only function of economic forecasting is to make astrology look respectable." This quote was certainly true if investors evaluated the economic and market prognostications at the onset of 2023. Most market "fortune tellers" foresaw an economic downturn, if not a collapse; they were wrong. Many others warned of a stock market declining significantly after a difficult 2022; they were wrong. And, finally, there were those who said interest rates would drop, including cuts by the Federal Reserve; they were wrong. Virtually every forecast of how our economy and markets would perform in 2023 was incorrect. 1 Clearly Rasputin does not live on Wall Street. 

The Ross Group believes that trying to predict the future is a fool's game. We think that smart investors should start by focusing on solid business fundamentals – a strong balance sheet, rising cash flows, additions to research & development, and other vital factors. Once an excellent business has been identified, then an investor waits until that company becomes inexpensive, and you invest for the long-term. It is a markedly different approach then those who try and base their investment decisions on short-term predictions about the economy, stock market, or interest rates. To our team, it is a matter of establishing your investment decisions on hope versus science. Hoping someone’s predictions about the future come true is not investing in our opinion; it is speculating. History is littered with examples, including at the start of 2023, of those predictions falling flat on their face.

Looking ahead to 2024, we will stay true to our investment disciplines. We will not be swayed by any soothsayer on TV or in the media. We will continue to identify the best-in-breed businesses and look for downturns that create opportunities. And we will try and remember Warren Buffett’s quote that “Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.”
 

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