Economist Encourages ASX Investors Not to Focus on Macro Issues

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Macroeconomic forecasts involving inflation, oil prices, and interest rates significantly impact ASX shares this 2022.

2022 has been cruel to ASX shares as external concerns immensely influence them in the economy. Even while shares reflect company ownership, business performance appears to have taken secondary to “macro” issues in terms of impact on share prices.

Dr Shane Oliver, the chief economist of AMP Ltd (ASX: AMP), a financial services company in New Zealand and Australia, rallies to neglect economic forecasts. 

He wanted to emphasise to AMP clients that these economic forecasters are only humans capable of making mistakes. Psychological biases may lead them to assume the market’s status in the future. And clinging onto forecasts will eventually lead to losing money.

Oliver states, “Forecasters, like everyone, suffer from psychological biases: the tendency to assume the current state of the world will continue; the tendency to look mostly for confirming evidence; the tendency only slowly to adjust forecasts to new information; and excessive confidence in their ability to forecast accurately.”

Furthermore, point estimates, such as the S&P/ASX 200 Index (ASX: XJO) reaching 7000 points by the end of the year, do not provide any risk information.

Instead of focusing on these uncertainties leading us to be risk averse, Oliver encourages investors to set up an investment strategy at the start of the fiscal year. Yet, this specific strategy must be updated regularly to avoid losing money.

Investing for the long run was an obvious strategy to weather short-term economic ups and downs. Oliver cited US financial specialist Charles Ellis, who stated in the 1970s that investing is a “loser’s game” for most investors. A loser’s game is one in which the one who makes the fewest mistakes wins.

“Get a long-term plan that suits your level of wealth, age, tolerance of volatility, etc. — and stick to it.”, says Oliver.

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