At the end of 2021, strategists at the world’s top investment firms such as JPMorgan Chase predicted the S&P 500 would gain 5% in 2022. As it turned out, 2022 was one of the wildest years in global markets for decades – Goldman Sachs lowered its year-end target on the S&P 500 no fewer than four times. Even the most bearish of commentators didn’t see the S&P 500 ending 2022 19.4% lower than it began the year.

Similarly, investors were unprepared when the safe and predictable bond market defied convention and, instead of delivering counter-cyclical returns, dropped along with equities, experiencing its worst year since bond record-keeping began and potentially breaking the 60:40 portfolio rule forever. It’s also safe to say that double-digit inflation in the West, the most aggressive US monetary-policy tightening cycle in 40 years, and Japan intervening in the foreign exchange market to buy yen, weren’t among 2022’s predictions.

For crypto advocates, 2022 was a shocker. Investors were taken aback when bitcoin and other cryptocurrencies lost more than 80% in the year, driven lower by the very same economic phenomena affecting risk assets and permanently ending the illusion that crypto asset performance could be decoupled from traditional financial markets. Investors were also blindsided by November’s collapse of cryptocurrency exchange FTX, where it’s estimated up to $2 billion of investor funds were hoovered up in (apparently) an ego-driven trip fuelled by greed and invincibility.

It seems the words ‘fraud’ and ‘theft’ were not in the lexicon, and the ramifications of this story will no doubt continue to play out through this year.

Predictions, as it turns out, did not help anyone make better investment decisions in 2022, but that didn’t stop market analysts and commentators from going back to their drawing boards and making predictions for 2023. Investors – most of whom saw the value of their investments decrease in 2022 – desperately want to know what’s coming next.

The prediction cited most often coming into 2023 was that the US would face recession. While economic theory suggests this is the most likely outcome of several scenarios, one can never be too certain. In a 2000 paper on the accuracy of private-sector economic forecasts, IMF economist Prakash Loungani noted that ‘the record of failure to predict recessions is virtually unblemished’. That was before the dotcom crash and the Great Recession, both of which took most experts by surprise.

Whether or not the US enters into recession remains to be seen. What we do know is that the higher cost of capital and slower growth is likely to cause company earnings to fall. But what about equity valuations, which have remained stubbornly high? Will they ease lower? I, for one, wouldn’t be so bold as to predict the level of the S&P 500, or any other index, on a specific date in the future.

Yet, when it comes to investing, there are some things that are within our control – such as whether to invest in FTX; and other things – such as Russia’s invasion of Ukraine – that are outside of our control. On the positive side, our ignorance isn’t total, and we are not some flotsam and jetsam caught in the grip of unpredictable and unstable currents. As long-term investors we know enough to take a step back from the daily noise and take a much, much broader view. We know that over time markets go up – particularly after a protracted period of losses – even if we don’t know exactly where the bottom is.

So, in times of uncertainty and negativity, forget about clever stock-picking or close reading of the inverted yield curve in the hope that you can time the market. That’s a fool’s game. Forget the daily market commentary. Instead, buy into a well-diversified index fund or carefully selected portfolio of companies, and hold. And the longer you hold, the better you’re likely to do. If you know you won’t be cashing in your investment in the short term, then no amount of market chaos today needs to trouble you. The hardest part of investing is simply holding your nerve through the bad times.

By Sasha Planting