American investors have a saying about the stock market that vies with “sell in May” as a seasonal saw. It says: “So goes the first week, goes January, goes the year.” If that is really true, at least 90 per cent of investors and market forecasters are in for a bad year.

Overwhelmingly, investment professionals forecast a fourth year of rising shares prices, more or less across the globe. Exactly what they are forecasting depends on whom you poll, but it averages about 9 per cent on the MSCI world index and 5 per cent to 10 per cent on the FTSE 100 and New York’s S&P composite index. Among the leading houses, only JPMorgan expects London prices to end the year lower than they began.

As soon as markets opened for the new year, share price averages moved hopefully higher, in Britain and across much of the world. But not in America and not for long elsewhere. Within five working days the world index was back where it started, the FTSE 100 was marginally down and the S&P had shed 1 per cent.

Fortunately, as the Californian investment thinker Ken Fisher points out in his new book, The Only Three Questions That Count, there is no magic predictive power in the first few days of January, or even the month as a whole. Share prices rise in January most years when they rise for the year as a whole, but that is true of virtually any month of the year.

Fisher’s key advice is that we have to get rid of all these accepted “truths” and generally held fears. It took Black Wednesday, when sterling was forced out of the exchange-rate mechanism in October 1992, to convince UK investors finally that devaluation could be great for share prices.

Consensus opinions about the market, or even multiple tips for the same share, are just as useless. They tend to be statistically meaningless, like the seasonal saws, or fully discounted in today’s prices. For example, anyone who is interested knows that real estate investment trust (Reit) status is good for property investment companies. So the expected benefits were probably fully discounted before Reits went live last week.

Only if we stop acting on information that is generally known, and therefore already allowed for in market prices, are we likely to cut down on our investment mistakes. Only if we discard the myths of the supposed art of investment can we avoid being victims of the stock market, which Fisher calls the Great Humiliator.

Whatever happens to share prices in January, therefore, it is unlikely that they will end the year as most of these professional forecasters have predicted. There are two reasons why they tend to be wrong. Market professionals are conditioned by history to protect themselves by adopting consensus views, just as amateur investors are conditioned to kid themselves that there is some secret formula for successful investing, if only they knew it. Market professionals behave, in Fisher’s phrase, like “cavemen in Mercedes with BlackBerries”.

Predictably, in most years most forecasters predict historic average returns. They look to an annual gain between 5 per cent and 20 per cent, with 10 per cent as the long-time favourite. In America, the consensus was for gains of 15 per cent to 20 per cent in both 2001 and 2002, the worst years of the bear market.

Although we do not really know why, however, calendar years rarely produce average returns. There are lots of good years, plenty of disappointing years and too many bad years, but there are extraordinarily few average years. One was 2006, at least if it was measured by the FTSE 100.

The other reason why consensus forecasts rarely come true, according to Fisher, is that they are discounted in the market. If brokers expect prices to jump, they will already have advised clients to buy anything that moves. If fund managers see prices falling, they will already have sold.

That does not mean that all forecasts are wrong: we cannot merely play sceptic and do the opposite. It does mean that we have to rely on our own judgment and accept that we shall also be wrong sometimes.

For more investment articles visit www.timesonline.co.uk/invest

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