Income Investor Perspectives

Are your smarter than the Magic 8-Ball?

-or-

Are you smarter than an FOMC’er? (Part2)

The Dot Plot has been circulating, and the big takeaway for me is not how many rate hikes we should see this year, but rather the diversity of opinion about where rates will be.

As I’ve noted before, even the members of the FOMC are not of one opinion, with participant’s assessments for the end of this year ranging from .875% to 2.125%. (The weighted average opinion is 1.29%.)

Which opinion is correct? Are any of them correct? There are so many variables at work, forecasting rates with precision is not realistic.

Yes–it makes sense for traders, hedgers and many others to be concerned and focused on the short-term movements in rates. But for investors, trying to time rates means that you are likely exposing yourself to higher risk by not being properly diversified.

If you really want to accurately forecast rates, read my article on how to do it.

Or, for a short-cut, ask The Magic 8-Ball. (If the answer is anything other than “Reply hazy, try again,” don’t rely on it.)