Economists: When they all State the same thing, is it worth knowing?

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Economists

When they all State the same thing, is it worth knowing?

I recently had the honour of being at a meeting in which 7 economists were giving their forecasts for this year. Usually when you put 7 economists in the same room you will get 7 completely different opinions. We have come to expect this over the years and go to find out the reasoning behind their forecasts. A great way to build my own hypothesis and properly craft my own client’s portfolios.

This year they were all were basically on the same page. This concerned me, as I don’t remember this happening in the past. I always counted on their many different theories to wade through. Following is an overview of three areas that they covered for Canada:

Interest rates

As I was about to publish this piece Canada cut our rate ¼%. None of the economists had put forth a prediction of this move. It made the title of the piece all the more poignant. I really did not know what to think of all of their agreed predictions, except to think that I had to continue, as I always had, to reason through everything, watch bond markets, continue to read and meet with many portfolio managers. These managers are using their own predictions to invest their client’s money. Their own future depends on doing the right thing.

The day before the rate was cut, I was speaking with a long term client and we both agreed that rates were coming down. We certainly did not expect it to be cut the next day, but we did pick the direction correctly. Together we have been following the ten year GIC rate and it has been slowly coming down all year. The rate setters at the major institutions had been preparing for this possibility ahead of time. This is just one piece of the puzzle of course, but an important piece.

Oil

Much to my surprise they all were basically on the same page. Oil was of course a major topic. All felt that the price of oil will continue lower before rebounding. They did differ on where it will rebound to, with the top end having a range between $55 and $80 a barrel by late in the year. Are they right?

They did differ on how the extra cash in the public’s pocket each week would be used. All but one see it being spent as consumers, helping the economy. The other felt they would save.

Canadian Dollar

All see the dollar slide continuing.  This interest rate decrease will certainly help this to be true and drop even farther than they predicted.

Of the three major areas they spoke of they are right on the dollar so far, wrong on interest rates and we will have to wait and see how oil plays out. Again I ask, When 7 economists all state the same thing, is it worth knowing?

If you want to see what a truly independent advisor can do for you, call me at 905-846-9060, ext.3838, email me at Terry.McIntyre@manulifesecurities.ca or visit my website at www.terrymcintyre.ca.