Elsewhere in the survey, the view that inflation and growth patterns are likely to be structurally different may explain why our survey participants expect Japanese bond yields to exceed consensus expectations. Participants’ much higher conviction in emerging market equities is a noteworthy change, with a majority expecting them to outperform US equities (S&P 500 Index) in US-dollar terms. Wellington investors were also significantly more bullish on Chinese high-yield credit on the back of China’s reopening.
Superforecasting in practice
We have been running our recurring macro survey for the last seven years and, reassuringly, the collective wisdom of Wellington captured by this survey has achieved a good hit rate to date for its forecasts as well as respectable Brier scores, which measure the accuracy of probabilistic predictions.
The idea for the survey originated from a conversation three of our macro thinkers had over six years ago about Philip Tetlock and Dan Gardner’s book Superforecasting. Tetlock and Gardner argue that forecasting is a skill that can be improved, and we thought their theory could work well in practice at Wellington, given the firm’s collaborative culture. The hope was to sharpen our collective and individual forecasting skills, enhance our internal investment dialogue, reveal where our views differ from the market consensus and identify how they change over time. The resulting internal survey gathers the anonymous responses of macro-minded investors across all disciplines, asset classes and office locations. The formulation of the questions is important. Wherever possible, our questions aim to be precise, time-bound, measurable, probabilistic and rollable from one quarter to the next so as to give us a richer data set over time. As exemplified by this quarter’s survey results about risk sentiment, the results can pinpoint where the firm’s views differ from the consensus and can also reveal important shifts in our collective thinking.