The difficulty of forecasting the economy and the stock market is a long-standing tradition here. Ever since the rapid rise in energy prices many have been calling for a fall in the domestic economy. However the news seems to be tracking in the opposite direction.

The Capital Spectator notes the news from the Conference Board’s index of leading economic indicators is all good. Despite low expectations the index has risen in five of the last six months. They note that there are some explanations for the rise, but by and large the economy is stronger than usual and difficult to forecast.

Surprises have been everywhere in recent years, from interest rates to consumer spending to the persistent buying of dollar-based assets by foreigners. What seems logical and imminent has quite often turned out to be wrong. Even the greenback’s supposed collapse has been put on hold, causing dismal scientists of a certain persuasion to scratch their heads and go back to the proverbial drawing board. The American growth machine appears to be the latest candidate to confound, mystify and bewilder the pessimists.

Anything’s possible in the global economy of the 21st century, with the possible exception of figuring out what comes next.

Even if you predicted the rise in the LEI you might have been confounded by the market’s reaction. Mark Hulbert in notes there is little correlation between changes in the LEI and the stock market. If there is any relationship it is negative, that is when the LEI presages a weak economy the stock market does better.

The challenge for investors who forecast the economy is two-fold. First the forecaster needs to get the direction of the economy correct. Second the forecaster needs to have the relationship between the economy and the stock (or bond) market correct. In short, investors should be careful how they spend their time (and capital) when it comes to using forecasts at the heart of their portfolio management process.

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Please see disclosures here.

Please see the Terms & Conditions page for a full disclaimer.