As long as Wall Street has been in existence, it has been a tradition around this time of year for market participants to make predictions about what might happen to stock prices, interest rates, commodities and exchange rates in the following 12 months. These predictions garner a lot of attention, as they are made by very smart people with access to the best data and vast resources at their disposal. And yet, far more often than not these predictions end up being hilariously wrong.

If anything, 2020 should have proven once and for all the futility of trying to make accurate market predictions. Coming into this year, nobody said a killer virus would emerge that plunge the global economy into the worst recession since the Great Depression, leading to one of the biggest stock market crashes in history and the price of oil tumbling to be below zero dollars a barrel, only to be followed by one of the fastest economic and market recoveries in history. Yet, a strategist who predicted the S&P 500 Index would be up more than 15% in 2020 would have been proven right - but for the wrong reasons.

So while big, sweeping forecasts are the ones that draw the headlines, the ones to pay attention to are those that only look one to two months ahead or 10 to 20 years ahead. The easiest forecasts to make are over the very short or very long term. That’s because the chances are very high that one-year predictions will be disrupted by exogenous events, unlike a very short- or long-term outlook. (Besides, the nice thing about extremely long-term forecasts is that by the time they arrive, everyone will have forgotten you made them.)

For those compelled to forecast financial markets in 2021, the first place to start is the Federal Reserve. The second is the federal government. Monetary and fiscal policy are the two biggest inputs to financial markets, and we don’t seem to be getting a lot of restraint in either. The Fed has pumped about $3 trillion directly into the financial system this year, mostly via its purchases of bonds, increasing its balance sheet assets to $7.24 trillion. It’s planning to continue to pump $120 billion into the bond market every month for as far as the eye can see while keeping interest rates at zero well into 2023.