Predictions for 2019? Why bother

Predictions for the year ahead. They’re difficult to get right, and this year that’s more true than ever. For periods of 2018, it was difficult to guess what might happen in the next few days, never mind 12 months.

This is made worse when those forecasts that you decide to optimistically commit to are published in the media, available for all and sundry to read.

Nevertheless, that’s exactly what The Independent’s business desk did this week, with the help of some of the City’s finest minds.

At the end of 2017, the group of prognosticators assembled by The Independent had the FTSE 100 closing out 2018 at anywhere between 6,800 and 8,000. The optimists based their forecasts on the fact that the index tends to move in the opposite direction to the pound (because it comprises so many internationally-exposed companies, weaker sterling is actually a benefit in this case). The forecaster also cited tentative hopes of a Brexit deal being reached, which would have given another boost to stocks.

As we all know, no such deal transpired, and in fact the devalued pound proved insufficient to prop up the market.

Although the FTSE started last year in a positive direction and reached record highs at one point, it limped to the finish, closing at 6728.13, well below where it started in 2018.

City stalwart David Buik, then chief commentator at Panmure Gordon, was the only one to come close with his forecast of 6,800 – however, when it came to stock picks, his choice of Faron Pharmaceuticals turned out to be ill-judged. He based his prediction on an upcoming drug trial, which, he said, would nudge shares up. Instead, the drug produced “incredibly disappointing” results and the stock plunged by more than 80 per cent, falling from more than 800p to 104p in one day. It has yet to recover.

Mr Buik applied the same thought, knowledge and considerable expertise to both his tips for last year, but only one panned out. He could have stuck a pin in a printout of listed companies and landed on a better bet.

There are just so many moving parts that can have an impact on these forecasts. Maybe a Brexit deal will be forthcoming, but maybe it will be achieved with the thinnest possible majority, and perhaps political tensions will drive the oil price up, there could a shock election in a major economy, or an unexpected extreme weather event. These are just some of the things that could affect that market that we might not see coming.

If we learned anything in 2018 it’s that predictions are a fool’s game. But that didn’t stop us indulging in the same conjecture we enjoy every year, and it’s unlikely to prevent the same at the end of 2019 and for many years to come. The only problem is that the old adage about today’s news being tomorrow’s chip papers no longer holds true.

Yours,

Caitlin Morrison

Acting business editor