As market volatility increases, you hear more and more experts weighing in on what you should do, when you should do it, and where the market is heading. A pundit is defined as an expert in a field who gives his opinions to the public. In contemporary form, let’s look at the punditry. Competing for spots on the news against the likes of Donald Trump, these folks need to display an extreme amount of confidence, have to make bold predictions, and have to make sure they stand out from the pack. Therefore, honest answers including a significant dose of doubt are not welcome. Be bold and predict something extreme! It is entertaining and will get viewers by appealing to their fear or greed.

Ken Gregory, a wise analyst of investment managers who is not a pundit, recently described markets as “predictably unpredictable”. If you let that phrase sink in, it is pretty darned brilliant. And if he is right (and in my 20 plus years of observing markets he is!!), pundits who tell you what the market is going to do next are playing a losing hand. The vast majority fall into three groups. The first group are the bulls, who sell you greed and discuss how much money you can make in a market. The second are the bears, who discuss how much money you are about to lose, inciting fear and a good size audience for their message. The third group is basically the followers of the current trend, telling you why rising markets will rise and why falling markets will keep falling.

Markets will tend to make these folks look silly for a couple of basic reasons. Markets and economies cycle (bad ones become good, good ones become bad, etc.) and there is a tendency for mean reversion. Mean reversion is the tendency for things to return towards normal (a skyrocketing market to fall back toward normal, a plummeting market to rise, etc.). How many pundits forecast the 2008 bear market? Most of them explained why it was inevitable only after it happened, not before. How many of those were bullish as we came into March of 2009? If your answer to these questions is…”not many”, you may be ready to realize why the pundits are not worth listening to-unless you have very low blood pressure and need to raise it.

If a pundit wanted to tell you that he or she had no idea where a market was heading next (because it is predictably unpredictable), but rather discuss the long term merits of a particular investment, well….we would not see them on television any time soon. That is your job as an investor – to produce a revenue stream from your capital that funds your goals for a lifetime. Listening to pundits has no role in fulfilling that mission.

By Ted Schwartz, CFP®