How Accurate Were My Year End Predictions?

Back in October as part of a group writing project, I made a series of year end predictions about where the economy would be at the end of 2008. Let’s just say it’s a good thing I’m not a professional economic forecaster. Here is a list of predictions I made and how they fared:

Who Will Win The Presidential Election?

My Answer: Obama

Result: It turns out I was correct on that one but by that point in the election season, Obama was commanding a significant lead in all the major polls. I wasn’t exactly going out on a limb on that one.

How Will The Dow Fare?

My Answer: Just above 11,000

Result: I couldn’t have possibly been more wrong. At the time, I suspected we had reached capitulation or close to it. It seemed as though the market was regularly shrugging off bad news, which is sometimes a sign of a market bottom. Well, it wasn’t. As of right now, the Dow stands at 8,391. I know the year isn’t quite over yet, but I would bet good money we won’t see 11,000 by Wednesday. Anybody willing to take that bet?

What About The Unemployment Rate?

My Answer: No Change from October

Result: As it turns out, November was one of the worst months for job losses on record, with over 533,000 non-farm eliminated in that month alone. December was a better than November, but that’s not saying much. Still, I’m optimistic a recovery is near. I have already seen signs of one locally.

Will The Bailout Package Be Effective?

My Answer: No

Result: It’s hard to tell these things for certain because the true effectiveness of the bailout plans will only become clear in hindsight. I think it’s reasonable to say at this point they haven’t been as effective as hoped. They may have helped prop up the financial system temporarily, but I think history will show there was relatively little long-term benefit.

What Will Happen To The Dollar?

My Answer: The Dollar will stabilize against major currencies.

Result: I actually wasn’t too far off on this one. There was a mini-dollar rally (and subsequent mini-bear market) as foreigners fled to the perceived safety of U.S. Treasuries and dollar-denominated assets. It’s probably unfair to say the dollar has “stabilized” but it’s currently faring a bit better than it was just a few months ago. We’ll have to wait this one out. The longer-term trend is still down, I’m afraid.