Top Risk Trends For 2024

The Economist published a 150-page report titled The World in 2020 in late 2019 with some economic and geopolitical forecasts for the upcoming year.

The magazine was packed with 2020 predictions from politicians, scientists, economists, CEOs, and business executives.

Most individuals that contributed to the issue were concerned about the long-term effects of Brexit, the next US presidential election, China’s rise to prominence in the world economy, climate change, and other issues. They didn’t have a lot of concerns about a healthcare crisis, a stock market meltdown, or a recession.

Clearly, nobody anticipated the extent to which the Covid-19 pandemic would impact life in 2020 and beyond.

How could anyone have known what was about to happen?

To their credit, by the end of 2020, The Economist apologised in a follow-up:

Well, we didn’t see that coming. Like almost everyone else, we were blindsided by the outbreak of covid-19, the first cases of which were identified in December 2019. As well as causign death and hardship around the world, and the delay or cancellation of events large and small, one of the pandemic’s less important side-effects was to invalidate most predictions for 2020, including our own.

We expected a global slowdown, but not the biggest economic contraction since the Depression. We anticipated continuing Sino-American tentions over Chinese exports, but not of the viral variety. We looked forward to action to reduce greenhouse gsa emissions, but not an 8% annual reduction, the largest since the second world war, as the pandemic throttled transport and industrial activity.

The pandemic genuinely changed the course of history.

Nobody could have foreseen the events that would transpire or their possible effects on our lives, our places of employment, the costs associated with those locations, the incomes that people make, and so on.

Yet that’s the main point.

When it comes to risk assessment, “We didn’t see that coming” should be your default assumption. Although the hazards won’t always be as great as those posed by a pandemic, people’s expectations of how things will turn out are rarely met.

Even in cases where “everyone” is confident about how things will turn out, oftentimes their predictions are incorrect. As this article from CNBC explains, Economic forecasts have been wrong lately, but that’s really nothing new; it’s all nonsense. Unfortunately, stock pickers, analysts, strategists, economists and even the Federal Reserve are no better at forecasting the “old economy” than they are the “new economy.” Strategists and analysts are poor at predicting earnings and economic trends. Economists are terrible. Even the Federal Reserve, with the finest economists in the world, have a terrible track record of predicting even short-term trends in inflation and GDP.

This also proves to be quite challenging for companies because every company has millions of different variables, each of which can affect their performance and outcomes.

On the macro level, the economy may face new shocks or surprises, such as inflation, a rise in interest rates, a war that disrupts critical supplies, or a cyberattack. The company may face a new competitor. It may be bought out or engage in an unforeseen merger.

Some factors may be predictable, but many are not.

Why are we so bad at predicting the future?

Due to availability bias, overconfidence, and recent bias, humans are poor at predicting the future. It’s also true that it’s hard to foresee the future because the world is intrinsically unpredictable, making a large portion of what happens unpredictable.

This holds true for projections that are both short- and long-term.

During both the George W. Bush and Bill Clinton administrations, Lin Wells was employed at the Pentagon. In April 2001, Wells wrote the following document for Bush:

The best statement in that document is the following one:

All of which is to say that I’m not sure what 2010 will look like, but I’m sure that it will be very little like we expect, so we should plan accordingly.

9/11 occurred less than six months later. Two wars, two enormous stock market collapses, a housing boom (and bust), a slight recession, and the greatest financial crisis since the Great Depression occurred in the first ten years of this century.

Wells was correct in 2001; nobody could have predicted how things would seem in 2010.

We’ve thought through some possible scenarios for 2024, but chances are that something unforeseen will occur and make our predictions incorrect.

Depending on factors like interest rates, inflation, economic growth, earnings, investor attitude, and other unforeseen events, the stock market may be rising or falling. Seldom is the danger that everyone is talking about or anticipating the next big thing.

Not that forecasting isn’t important. To exist, everyone essentially needs to make predictions about the future. Forecasts are necessary for businesses to plan ahead and determine their investments, expenses, and hiring decisions.Forecasts are necessary for households to organise their borrowing, spending, and consumption patterns.

For the purpose of financial planning, investors must create predictions in order to establish baseline expectations for gains or losses.

When going on holiday, people should check the weather forecast to plan their packing.

It’s okay to forecast. It is inevitable for everyone to consider the future, whether they like it or not.

However, it’s critical to recognise how frequently life interferes with your expectations. Surprises happen more frequently than we expect.

There will be an unexpected event in 2024.

When it does, just don’t be shocked that you’re shocked.