Bleak Outlooks Can Impact Personal Wealth

Some business experts and economists warn that market indicators can actually become variables that impact the economy and consumers’ choices about investing. While some analysts argue over the accuracy of the predictions, others warn of the impact of the predictions themselves.  According to the New York Times, this idea has been tested and validated by recent research in behavioral economics, a field that has grown extensively in the last decade. But according to business experts, “Emotion and impulse have no role to play in investing. The key to a successful portfolio lies in planning, discipline, and reason.”Karl Case, professor emeritus of economics at Wellesley College and the co-creator of Standard & Poor’s Case-Shiller home price index says gloomy predictions have caused home buying to go from an unquestioned virtue to something to be wary or frightened of.According to Case, “People are discouraged and fearful. People thought home prices would never go down. Now people think they’ll never go up. The fear is there won’t be any gain.” Case went on to say argue that 2012 is a good time to invest, regardless of the economic outlook and predictions. “Mortgages are cheap. If you’re buying a house or apartment to live in and pay for over time, and can afford the payments, then it’s a terrific time to buy.”Experts warn, “Do not fall prey to the myth of ‘market timing.’ This is the belief that by getting into or out of a security at exactly the right moment, we can retire rich. Market timing does not work. Instead, use the investment strategies that do work.”While speculation of impending political changes, coupled with continuing worldwide economic fluctuations are prompting bleak outlooks for 2012 from some economist, analysts who have adopted the so-called contrarian and value investor view, are predicting a positive 2012. According to the New York Times, contrarian and value investors argue that pessimism may be overweighted in asset prices, making gloom a bullish indicator. From this perspective market prices are in large part predictions, not snapshots, of the present.Even as economic news worsened in 2011, some investors began large scale buying sprees. Efficient market theory argues that the bad news about the future is already reflected in current stock, real estate and other asset prices, making 2012 a prime time for extensive investment that may offer potentially large dividends.Well-known mutual fund manager, Bill Miller says, “A great deal of pessimism is already built into the U.S. equity market.” Miller is enthusiastic about high-quality United States stocks saying, “Contrary to what appears to many to be the case, the U.S. economy has been accelerating. We’ve had good growth, and it’s improving.”A negative voice in the discussion on 2012 economic projections is reported by the United Kingdom’s Telegraph. According to the Telegraph at least half a dozen leading forecasters predict a recession for 2012. And according to the Bank of England’s Governor, U.K. households have suffered the tightest squeeze on living standards in around 80 years.Experts predicted the United States would see some economic recovery in 2011. When economists projected growth and there was vast improvement in consumer confidence. In actuality the economy did not grow as projected and consumer confidence waned as the year progressed. The forecasts themselves acted as variables, influencing economic growth and recovery. The new year brings a new slate of predictions and reactions and potential for recovery.According to experts the best strategy is to use, “a balanced allocation of your portfolio's assets among securities that suit your individual needs, the use of dividend-reinvestment programs and other cost-saving strategies, and a well-disciplined, long-haul approach to saving and investment.”