Living in the south where weather changes frequently, I have never relied on forecasts. Instead, I opt to look out the window to see what's happening in real-time.
However, advancements in technology have led to more accurate weather forecasts. Today, three-day forecasts are as reliable as 36-hour forecasts in the 1980s, and the error in hurricane-tracking predictions has reduced by two-thirds since the 1970s.
This improvement is due to computer models that collect data on temperature, clouds, and winds, and use mathematical equations to make predictions. As more factors were identified and fed into the model, the accuracy of the forecast improved.
Similar attempts have been made in the stock market to predict market behavior.
Despite endless efforts to identify predictive variables, none of them have much value, especially in the short term. Guessing is no way to make investment decisions.
As Ben Graham, a pioneering investor, said, "In the short run, the stock market behaves like a voting machine, but in the long term, it acts like a weighing machine."
The collective feelings of humans often dictate the stock market, based on fear or greed, making it challenging to predict which way the vote will go. Investing is not a physical science, and it doesn't follow set laws.
Although human behavior seems predictable, it's challenging to know what we're doing until it's too late. Therefore, beyond the basics, such as stocks typically performing better than bonds or cash in the long run and low expenses being a good sign of future relative performance, the stock market remains a guessing game.
It's crucial to remember that there is no proven, market-predicting model that only a select few have access to.