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Investing Specialists

Looking for Positivity on the Markets? Don't Hold Your Breath

What can we learn from the fact that few predicted 2013's big rally?

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A high-profile weatherman in Chicago is well regarded in meteorology-geek circles, but he's also well known for being overly pessimistic in his forecasts. When this particular meteorologist is predicting a foot and a half of snow followed by negative temperatures, as he was this past week, I know that we'll have a decent amount of snow and cold temps, but that the bad weather won't rise to the level of his gloomy forecasts.

So why does this forecaster continue to be venerated for his accuracy? I'll hazard a guess. If you get people geared up for poor weather that doesn't materialize, no harm done: Who's going to complain if they unnecessarily pulled out the heavy-duty boots or planned on a longer commute than usual but ended up getting to work early? On the flipside, if bad weather does happen and you helped people prepare for the misery, both physically and psychologically, you're a hero.

Christine Benz does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.