In a talk on Thursday, chief economist Haldane claimed the shock crash of 2008 was the economic profession’s “Michael Fish” moment, referring to the weather forecaster’s 1987 prediction the UK would avoid a storm that went on to ravage the south of England.
However, Dan Kemp, CIO at Morningstar Investment Management, said he was “amazed” Haldane picked at specific forecaster failings when, in his view, all forecasting will ultimately fail.
“His focus on that moment in 2008 is a point where forecasting failed and that’s the moment people recognised it, but what our criticism would be is that it’s not just that forecasts failed at that point but generally forecasting fails because it assumes that people are rational,” Kemp said.
“It’s amazing to me that we have someone who is as eminent as Andy Haldane, a brilliant economist, talk about specific forecasts when we would scrap the whole premise of forecasting as something that, in our view, is doomed to failure.”
Morningstar looks at individual asset prices rather than overarching economic predictions, and Kemp warned while they do see some “danger spots” cropping up in 2017, it did not mean they were forecasting another crash.
He said: “When we look ahead to 2017 we spot a number of asset prices that to us look too high, but that does not lend us to forecast that there will be some sort of crash. There are always opportunities, there are always danger spots.
“There is quite a lot of danger out there but I think it’s important that people do not take that next step of forecasting what’s going to happen.”
