If you go to cocktail parties or meet regularly with colleagues for a few years, then you almost certainly witness people speaking without knowing what they’re talking about. Humans are generally overconfident about their knowledge of everything, including personal finance. To help assess your personal financial IQ, here’s a 30-second quiz.
In an era of financial titans like Elon Musk, Jeff Bezos, and Warren Buffett, it's hard to imagine that, at the turn of the 19th century, one of America's dominant investors was a woman. But it's true.
Big declines in the stock market are associated with recessions, and stocks often bottom months before recession-end.
Let's talk about stock market volatility because we have seen some extraordinary volatility lately. Let's start by recalling the basic axiom of investing in common stocks: If you want the so-called equity risk premium, then you should expect stock market volatility and, in fact, welcome it. It’s completely counterintuitive.
Stocks have been in a bear market since June 13, 2022. The decline began on January 3rd, worsened in February when Russia invaded Ukraine, and sunk further after the Federal Reserve in March began an aggressive series of interest rate hikes to fight inflation.
The Federal Reserve System, the nation's central bank has a dual mandate to pursue maximum employment and maintain price stability. These two priorities are currently treated equally, but this was not always the case. In fact, the Fed's bias toward maximum employment in the late 1960s and 1970s was a critical driver of the Great Inflation.
The Standard & Poor's 500 stock index fell into a bear market on June 13, 2022, rebounded in the summer, and then tanked again as summer ended; autumn is beginning with the fall continuing. This morning's higher than expected inflation number may make you wonder when the post-Covid financial pain will stop.
Everyone says trying to get in and out of the stock market is unwise, but this bar chart makes clear why.
Last week, we provided 10 year-end tax reminders. In case you missed it, it's on our website.
This is an unusual year-end tax planning season. The pace of federal tax law reform has increased in the four decades and accelerated since the pandemic.
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Amid 2Q '22 Turmoil, Fed’s Robo-Economist Forecast Was More Accurate Than Leading Economists
Published Tuesday, August 2, 2022 at: 9:47 PM EDT
In the three tumultuous months of the second quarter, the Federal Reserve of Atlanta’s algorithm for estimating quarterly economic growth was far more accurate than consensus forecasts by leading economists. That’s unusual.
The Atlanta Fed’s GDPNow predictions are sometimes wildly wrong. Though consensus forecasts of economists are far from perfect, the humans have been more reliable than the GDPNow algorithm.
The Fed’s GDPNow forecast is updated two or three hours after the government releases economic data throughout every quarter. GDPNow’s prediction is designed to come closer to the actual growth rate announced by the BLS as the end of a quarter nears.
Although the Fed robo-economist’s track record is mixed, it was more reliable than the human experts in the second quarter, which was beset by multiple anomalies, including supply chain disruption, declining demand for inventory, and Fed rate hikes. The humans were overly optimistic for nearly the entire quarter.
There are two highly credible surveys of leading economists: a quarterly poll of 60 economists by The Wall Street Journal, and a monthly survey by Blue Chip Economic Indicators, cited by the Atlanta Fed along with its weekly updated GDPNow algorithm.
The actual GDP for the second quarter came in at a decline of nine tenths of 1% on July 28. The Wall Street Journal’s consensus forecast of 60 leading economists, published July 17, expected growth in the second quarter to come in at about four tenths of 1% -- 1.3 percentage points higher than the actual result.
In this period of concurrent anomalies, forecasts by GDPNow were much closer to reality since early May; The forecasts human experts clung to a 3% growth prediction for months and did not revise it lower until July – and then to 2%, nowhere near the negative actual rate of growth announced on July 28.
We’re not saying that the GDPNow forecast is a breakthrough in predicting the economy, but if the algorithm is better at predicting quarterly results in periods of high economic uncertainty, it would be good to know.
Tracking developments like this is just one way we help you make long-term investments amid a changing world.
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