How will U.S. gross domestic product change during the next two years? For asset allocators evaluating the state of the global economy and pondering its effect on asset prices, the question of the U.S. outlook remains important. The answer, however, seems to have consistently eluded forecasters from many government, quasi-government (e.g., international authorities), and private organizations for the past five years.
Point-in-time forecasts from some of these organizations since 2011 show an interesting and statistically significant trend. During the past five years, forecasters repeatedly have proffered overly optimistic predictions (by more than 50 basis points) for inflation-adjusted, long-term growth rates but excessively pessimistic predictions (approximately 25 basis points) for the near term. As asset allocators begin planning for 2017 and beyond, they may want to account for this bias when formulating their own long-term outlooks.