Wall Street Wises Up to the Folly of Forecasting

It is that time of year, when the financial industry engages in its annual ritual of making forecasts, which is usually little more than the prelude to looking foolish. Titles like “Outlook for 2018, “What to expect in the new year,” or some variation thereof litter the landscape. Over the years, it has been my distinct privilege (and truth be told, pleasure) to point out how silly this process is.

On this topic, I am thrilled to welcome some new company. Some of the bigger firms and mainstream economists have recognized that this sort of game is no longer worth the effort. Perhaps no one is better placed to recognize the absurdity of the annual forecasting binge than UBS global chief economist, Paul Donovan. In a note to clients this week, he exhorts his economic brethren to stop the ridiculous prognostications, and instead, provide meaningful value to clients. In a note titled “What can we forecast about next year?,” Donovan bluntly states: