Follow stock market trends, not the predictions

On Dec. 31, 2019, the Dow Jones Industrials will be at 27,847.82, the S&P 500 will be at 3,027.98 and the tech-heavy Nasdaq will be 8,354.88.

Most predictions I have seen over the years do not happen either.

During the tech crash Barron's did a survey of 22 Wall Street experts and their predictions for the Dow and Nasdaq for 2001 and 2002. In 2001, the Dow closed at 10,021 and the Nasdaq closed at 1,950. The closest predictions were 11,400 and 2,500, respectively. In 2002, the Dow closed at 8,342 and the Nasdaq closed at 1,336. The closest predictions were 10,000 and 1,700, respectively.

The great "perma bull" Abby Joseph Cohen of Goldman Sachs predicted in December 2007 that the S&P 500 would rally to 1,675 in 2008. Instead, it retreated to 741.

Please don't ever base your investment strategy on predictions.

I think it is more feasible to have a feel for the direction of the market. As you can see from my predictions I think the direction of the market is up for 2019.

We have had the best January and February in decades. Is there a January effect, meaning a strong January predicts a good year in the market? Ken Fisher, a columnist for Forbes, has written an article entitled "Seasonality, however you slice it isn't predictive." He has a chart going back 40 years on this. Out of the last 10 years only four times January proved to be predictive. It's nice to have a strong beginning to a year but don't base your investment strategy on it.

From my research I don't believe we will have a recession this year. I think we are getting closer to one.

Larry Kudlow, the head of President Donald Trump's national economic council, said, "The president's policies are working. There are lower tax rates, deregulation, trade reform, energy reform and they are all really working."

I look at the rest of this year like when I was a kid and bought a ticket to take the scary ride through the haunted house. Riding in the little car in the dark and going around every corner filled with suspense I would try to be brave and not scream at the skele-ton that almost jumped in my lap or yell at the wicked witch that was going to clobber me with her broom and, well, you get the idea.

There could be a scary surprise from the Fed even though we are almost convinced they won't risk raising rates this year. It is hoped that the 10-year interest rate will stay around 2.8 and the 30-year rate at around 3.

Perhaps the biggest and most serious unknown is the relationship between China and the U.S. China impacts the entire world, but so far, not as much as the U.S. The book "The China Dream" by Liu Mingfu says it all. The first page reads, "It has been China's dream for a century to become the world's leading nation. China's economy will lead the world. As China rises to the status of a great power in the 21st century, its aim is to be the leader of the modern global economy." The author is a retired colonel of the People's Liberation Army and a professor at China's National Defense University.

This relationship will impact our investment environment for years to come. President Xi has to be smiling as he sees the seeds of socialism being planted in the U.S. He knows this will facilitate the transfer of world hegemony from the U.S. to China.

This month is the 10-year anniversary of the bull market. The S&P 500 has quadru-pled. Yet the S&P has endured eight bear markets (a decline of 20 percent or more) in the past 60 years. That averages one every 7½ years. On that basis we are overdue but 1 don't think this is the year.

Vern Hayden, CFP sold his last investment company that managed $100 million and has started his new business, The Center for Retirement and Investment Planning in Westport with $17 million so far. He can be reached at 203-5575551 or hayden4t9@ aol.com.

The Center for Retirement and Investment Planning is an independent firm not affiliated with Money Concepts Capital Corp