Forecasts of specific outcomes for the market have often misled investors.

A common practice in the industry is to set a full-year estimate and revise it quarter over quarter. This reminds me of popular HGTV shows where the renovations start at a certain price, and by the end that price changes three or four times. An expensive 30 minutes for the homeowner.

The analyst community calls this a revision and moves forward as if the previous call was irrelevant. For investors, we are left trying to understand the value of estimates in the first place.

The Federal Funds rate is the most forecasted item in the markets today. As the starting point for rates throughout our financial system, it holds an important position in determining the outlook for many other forecasts.

Insightful investors will also understand that the direction of the Fed Funds rate is typically more important than the rate itself. A rising rate, as we are currently experiencing, is meant to slow growth and tighten financial conditions. A declining rate is meant to spark growth and ease access to financing in the system. Declining rates are typically brought about by economic hardship, and with limited exceptions, saved as an emergency tool.

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Today’s forecasters are predicting a wide array of future Fed Funds rates. The most recent dot plot places estimates anywhere from 4.25% to 5.5% by the end of 2023. A fair range given the normal movement of 25bps per meeting.

It’s important to note, the estimates come straight from the committee that actually controls the rate. One would expect the people in charge of the rate to have the best view of where it will go. Last year's experience begs to differ.

In early 2022, the Fed predicted rates to rise by approximately 75bps through the end of the year. They ended up making four consecutive rate hikes of that amount between June and November. We find our financial system yet again holding its breath for the next Fed meeting press release.

Where is the accountability? In terms of the daily financial news, there is little.

Take a look at headlines over any time frame, and you’ll find bold claims of certainty that simply didn’t materialize. Fortune magazine, for five years during the late 90s, listed Enron as one of “America’s Most Innovative Companies.” That streak ended in 2001, when Enron went out of business. Fortune remains a mainstay in financial reporting.

The point is not to say that forecasts are useless. They can be insightful and at times accurate. History shows us they should be left open to interpretation and certainly not relied upon.

A better use of our efforts would be understanding a business and what value it can generate through its operation. Knowing what you own is the best way to understand whether market predictions, right or wrong, will affect your financial plan. Having a discussion with your fiduciary about what you own and why you own it is the first step to understanding forecasts.

Patrick E. Gauthier is chief investment officer at CPS Investment Advisors in Lakeland.

This article originally appeared on The Ledger: Don't get caught up in forecasts. Largely stick to your plan