What you need to know about the FOMC’s dot plot

One of the greatest investors of all time, Peter Lynch, famously said “If you spend more than 13 minutes analyzing economic and market forecasts, you’ve wasted 10 minutes.”

If you spend even a second thinking about dot plots, that’s a second you can never have back. There’s literally nothing stupider you could be paying attention to as an investor.

 

chicken bones

 

The idea that there’s any meaningful signal contained in this diagram of Fed governors’ own expectations of where rates will be in the future is laughable. The Fed’s own economic forecasts for GDP have been off by a factor of 50% during each of the last six years. The FOMC just slashed its 2015 GDP forecast from March by 24% yesterday! YESTERDAY!

Why even bother?

The Fed-watching economists who divine rate forecasts from the data were unanimous that rates would rise in 2014 – 67 out of 67 economists. And rates ended up collapsing while the long bond had one of its best years in history.

I don’t know what will be with rates. Here are some things I know for sure:

The Fed itself doesn’t know where the economy will be next month, quarter or year.

It never has.

It never will.

Economists don’t know either.

Some will be right, some will be wrong. There’s no way to know which economist to listen to and when.

Even if you can figure out when rates will rise and by how much, you can’t know how markets will react anyway. So what’s the point?

Those parsing the statements from the Fed in search of meaning may as well be translating the barks of a dog into Sanskrit.

Anyone who thinks they know what will be going on in 2017 is a wacko from Disneyland. Adjust the attention you’re paying to that person accordingly.

This is the last thing you will ever read about dot plots on this blog. Ever.

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. click this link here now commented on Jan 05

    … [Trackback]

    […] Information on that Topic: thereformedbroker.com/2015/06/18/what-you-need-to-know-about-the-fomcs-dot-plot/ […]

  2. Digital Transformation Consultants commented on Jan 16

    … [Trackback]

    […] Find More here to that Topic: thereformedbroker.com/2015/06/18/what-you-need-to-know-about-the-fomcs-dot-plot/ […]

  3. top ci tools commented on Feb 07

    … [Trackback]

    […] Read More Info here on that Topic: thereformedbroker.com/2015/06/18/what-you-need-to-know-about-the-fomcs-dot-plot/ […]