— Regarding economic forecasting, economist John Kenneth Galbraith once said, “There are only two kinds of forecasters – those who don’t know and those who don’t know they don’t know.” Depending on the year, some may suggest that I’m in the second camp.
I take some comfort in what former Dallas Fed President Bob McTeer once told me. He said that most economists aren’t very good at forecasting, but it is expected of them. “So if you’re going to forecast,” he said, “do it often and do it late.”
While a humorous comment, there is certainly an element of truth in it as I take my annual look back at what happened in 2012 and what I think might happen in 2013. You might call it my annual victory lap or slow crawl to the locker room, depending on how I did.
2012 was another strange year, to say the least. Ironically, it was not as volatile as 2011, with the DJIA trading in a 1,630-point range versus 2,450 points in 2011. From a portfolio management standpoint, less volatility is actually more challenging in terms of getting excess performance. As far as the U.S and global economies are concerned, I don’t think we fixed anything and have mostly sown the seeds for what will eventually be another crisis. Things seem stable now but there is a lot of unfinished business.
Here is what I said in January 2012 and what actually happened:
1. “The European debt crisis continues in and out of the headlines as Europe goes into a recession. Nothing is resolved but they do manage to kick the can down the road a little longer.” True and accurate.
2. “The U.S. economy does not go into recession in 2012 but continues to limp along at a weak 1 to 2 percent GDP growth rate. Global GDP will be the same.” True.