Compare that to the alternative. How does that discussion turn out if you build your own forecasting model and it delivers dismal results?  The story probably ends with you sleeping in the doghouse and/or polishing your resumé.

In the short run, hiring a scapegoat, er, forecaster, seems the path of least resistance. That’s why so many people choose it. But in the long run, that path leads you nowhere that you want to go. You will be in fine company as you underperform, but underperform you will.

People also look to forecasts that reward their confirmation bias, reinforcing and validating their understandings of markets and investment strategy. Sadly, I must confess that I much prefer to hear a forecast or read analysis that confirms my own biases. Which is one reason I make sure to read the analyses of those who don’t agree with me.

I typically ignore – for good reason, as we will see below – forecasts based on mathematical models. I much prefer the assessments of those who analyze the future in terms of trends and general economic forces, giving us their own sense of direction about the interplay of the complex drivers of the economy. But that’s just me.

Fed Says Fed Forecasts Fail

All right, so if forecasting the stock market is harder than it looks, how about forecasting the economy? Surely the Federal Reserve has a good handle on future growth prospects.

If that’s what you think, prepare to be disappointed.

We can’t say the Fed doesn’t try. In 2007 the Federal Open Market Committee (FOMC) started releasing GDP growth projections four times a year. They do this in the same report where we see the much-discussed interest-rate “dot plots.” It is called the “Summary of Economic Projections,” or SEP.

A 2015 study by Kevin J. Lansing and Benjamin Pyle of the San Francisco Federal Reserve Bank found the FOMC was persistently too optimistic about future US economic growth. They concluded:

Over the past seven years, many growth forecasts, including the SEP’s central tendency midpoint, have been too optimistic. In particular, the SEP midpoint forecast