We rewind the clocks to see how last year's predictions turned out and assess what it all means for the current crop of forecasts. As December draws to a close investors invariably start to look ahead at what they can expect in the New Year. There is never any shortage of expert views as to what is going to happen, but how safe is it to actually rely on their forecasts? To find out we must first head back to this time last year.
The ghost of Christmas Past
The FTSE 100 finished 2009 at 5413 after rallying sharply from its March low when it briefly dipped below 3600. Gold also had a good year, but was off its high at $1,105 per ounce, while oil had almost doubled to $79 a barrel.
Coming into 2010 many of the experts were concerned about whether this remarkable rally in risk assets could be sustained. Amongst the more pessimistic was Charles Stanley, which was one of several firms questioned by The Times back in November 2009.
Charles Stanley actually forecast that there was a 50% chance that the FTSE would finish 2010 13% lower at 4700. They did however point out that if the 'sweet spot conditions' lasted longer than they expected then there was a 25% probability it could finish at 6000 or above.
Of all those questioned by The Times the firm that came closest to getting it right was Killik & Co. They predicted that the FTSE would finish 2010 at 5850 and look like being almost spot on.
For some of the more outrageous predictions you need look no further than Saxo Bank, whose forecasts are reported on FT Alphaville . This time last year they thought that gold would fall to $870 an ounce, the dollar would strengthen to 110 Yen and the price of sugar would drop by a third to 18 cents a pound.
The ghost of Christmas Present
As it turned out, 2010 was another volatile year for the markets. Shares started well but suffered during the second quarter as the Greek sovereign debt issues dominated the headlines. Prices then rallied before it was Ireland's turn to unsettle the nerves, although the bailout has at least temporarily restored a sense of order.
At time of writing the FTSE looks like finishing 2010 at around 5900, a healthy increase for…
