How much attention should we pay to forecasts?
I recently hiked into the mountains for some spring skiing. The forecast wasn’t great: cloudy with showers, then partial clearing, with a front moving in the next day. When we arrived at the trail, expectations had deteriorated—the following day was supposed to bring worse weather—snow, sleet, and freezing rain. But there was a lot of snow right then, and we were prepared. If conditions deteriorated, we could always ski out. So we headed up.
The first day was as advertised: soft snow and cloudy conditions. In fact, it was as foggy as I’ve ever experienced. For a while, we could only see about 20 feet. The skiing was good, though, and our group stayed close together. That evening the temperature dropped, and we wondered if the next day would be stormy.
That didn’t happen. It dawned clear and cool, promising a bluebird day with warm sun and “hero” corn snow. There was still a cold front coming, but not until later that afternoon. In the meantime, we enjoyed some amazing skiing—the kind I see about once every ten years.
Markets can be like the mountains. Conditions can change rapidly, and we need to pay attention to forecasts and be ready. But the market can deliver positive as well as negative surprises. If we had listened to our fears and stayed home, we would have missed out on one of the best days ever.
Investing isn’t about hope and fear. It’s about managing risk, preparation, and presence. As Woody Allen is supposed to have said, 80% of success is just showing up.
Douglas R. Tengdin, CFA
Chief Investment Officer
Leave a comment if you have any questions—I read them all!