This time last year, the prognosis was that the U.S. economy was headed into a recession and that there would be a downturn in the stock market. It was a prediction held by many professionals – economists and financial analysts and experts, and reported by journalists.
It was also a forecast held by some individuals who fancy themselves “experts” in such matters, and who panicked, especially in Q2, and pulled money out of the market.
They were proven wrong.
Instead, this is how 2023 ended:
- The unemployment rate is 3.7% and wages grew 4.1%, indicators of a strong labor market.
- The inflation rate was 3.1% in November 2023. (December’s inflation rate will be updated on January 11.)
- The major indices closed up with the best performances in years. The Dow Jones was up 14%; The S&P 500 was up 24%; and the NASDAQ was up 43.4%.
This was a welcomed surprise. One, for which I am certainly grateful.
It’s Something We All Do (and Ask)
Are you familiar with the “Monday Morning Quarterback Syndrome”? I initially heard of it in relation to football and the criticism of the games played on the previous Sunday. But, it applies to so much more.
Because, it is really about the behavior of second-guessing past decisions, dwelling on past mistakes, or criticizing someone else’s action. All done from the comfort of hindsight.
In psychology circles this phenomenon is referred to as “hindsight bias,” and it is something with which we all have experience.
Either because we’ve done it to ourselves. Or, others have done it to us with regard to the choices we’ve made or actions we’ve taken. Or, we have done the same concerning the choices and actions of others.
Yes, I am immensely curious as to how so many people got the economic and stock market forecast for 2023 wrong. But, today’s missive isn’t about that. Nor is it about critiquing their failed predictions with the admonishment of, “What were they thinking?”
Following the Herd
We identify with them as “our people.”
Even if you describe yourself as the most strident independent, even if you are a proud member of the contrarian camp, you seek the validation, safety, and comfort found from identifying with a particular group. We all do.
So, the wrong predictions about 2023 has me thinking about this human tendency to follow the (a?) herd. And how sometimes that can work in your favor, and sometimes it doesn’t.
The Road Well (or Less) Traveled
Sparked by my own 2024 goal planning process and seeking examples of people who are doing things differently than I am, I started wondering about the relationship between the goals you and I set and what role who we follow (or don’t) has on our approach to achieving them.
I’ve come across some other entrepreneurs who are “doing” marketing differently. I find this exciting and energizing. Not only because what they are doing is the opposite of what I’m currently doing. But also because they are bucking common trends and typical marketing/business advice.
I’m still in the process of figuring out my next steps in terms of what I’ll integrate from what I’m learning, as well as how and when. But, I am sharing this to highlight three points:
You are always following a herd, and others are following you believing you belong to “their” herd. So, the goal isn’t “don’t follow the/a herd,” it is to be clear-eyed regarding the herd you are following…and why.
What others are doing (or not) can offer insights or guidance. The key is to avoid following others blindly, or simply due to FOMO (a fear of missing out).
Be mindful of your behaviors, thoughts, and decision-making process. Maintain your commitment to being a critical thinker, sourcing information from multiple sources, and having a process for “testing & trusting” your own instincts and analysis.
Who You Listen to Matters
The economy and stock market are public and universal examples of what happens when you follow predictions. In 2023, those popular prognostications didn’t pan out. The result: Lost money!
In some instances, the money lost is literal; in others, it shows up in the opportunity cost of shifting to cash and thus missing out on the bull market.
But, you may be reading this thinking of a more private and unique example of where you followed a prediction, advice, or opinion and doing so didn’t pan out as was expected, forecasted, or promised.
In either scenario (public or private), having the experience of things not working out can potentially lead to a loss of confidence in your decision-making skills, have a negative impact on your self-trust, and/or increase your self-doubt.
Look, if 2023 had ended with a recession and a downturn in the stock market, those professionals and those who heeded their predictions, including the “pseudo-experts,” would be celebrating being “right.”
So, make sure you keep this in mind.
And, please remember to be kind to the expert or trusted family member or friend you followed…and to be kind to yourself for following them.
If the performance of the economy and stock market served you well, enjoy this outcome.
Because honestly, outcomes and what influences them can be unpredictable.
However, at all times, your job is to recognize when you are following any prediction, advice, or opinion without the involvement of any critical analysis of your own. And if you choose to go in a direction that diverges from others, stay connected to “why” you’ve chosen a different path.
This is how you listen to the most important voice: your own! (Also a key factor in having what you want, by the way.)
I hope 2024 is off to a wonderful start!