A lot of stuff happened in 2024.
While it may be difficult to compile a comprehensive list of all the major events of the year, hopefully we’ll at least be able to remember the lessons we learned from them. Specifically, the lessons we may be able to apply in the future as we try to make sense of what new developments mean for our investments.
Here are some of the lessons TKer learned (or relearned) this year.
Most major news outlets are very good at accurately reporting what they report. But that doesn’t mean what you see reported won’t lead you astray.
In my many years consuming and processing an ungodly amount of news, I’ve noticed three types of accurately reported facts that can be problematic: 1. A source who’s quoted accurately, but the source is wrong; 2. A stat that’s true, but lacks relevant context; and 3. An anecdote that’s real, but the bigger picture reveals something else.
The lesson: All reported information needs context and double-checking.
Aspects of the markets and the economy can be worse and good, simultaneously. They can also be both better and bad. That’s because “worse” and “better” are relative terms, and “good” and “bad” are absolute terms. Kind of like when you’re starting to recover from the flu: Maybe you feel better, but that doesn’t mean you feel good.
In the markets and the economy, this can get confusing when you consider developments in the various metrics investors follow. For instance, size is an absolute. And the relative terms used to describe size include “growing” and “shrinking.” But the concept of growth can also be considered an absolute. And relative terms like “accelerating” and “decelerating” describe it.
Another layer of complexity comes when newly released data is measured against analyst forecasts. A metric can simultaneously be good, growing, and accelerating and yet fall short of analysts’ estimates.
The lesson: Just because a metric has gotten worse or fell short of expectations doesn’t mean it has gotten bad. Be wary of headlines that emphasize relative metrics.
Economic forecasters over-indexing to metrics like the yield curve and the Conference Board’s Leading Economic Index have learned this lesson the hard way: These once reliable predictors of recessions have failed to do so in recent years.
Not everyone was surprised as the overwhelming bulk of other data suggested the economy had a lot of growth left in it.
