forecasting is a technique that uses historical data to make informed decisions about future events or conditions it isn t simply guessing a tool for businesses and investors alike forecasting takes expert analysis and applies complex models to allocate portfolios and budgets 
but just how reliable are these crystal ball like predictions after all economists investors and financial planners frequently display a striking talent for mordant humor about the art of economic prediction the only function of economic forecasting the famed 20th century economist john kenneth galbraith said is to make astrology look respectable 1 or as an equally influential economist paul a samuelson put it wall street models predicted nine of the last five recessions 2yet forecasting is central to modern investing and business practices businesses hire and expand based on predicting sales figures market demand or economic indicators investors trade stocks invest in funds or rashly exit the market based on predictions about stock prices interest rates or broader market moves however the work of forecasting applies far beyond boardrooms and trading floors consumer spending patterns job market trends and even geopolitical events all fall under the purview of forecasters keep in mind economist john maynard keynes s dictum that the inevitable never happens it is the unexpected always we detail below the different forecasting methods and how they share a common goal to reduce uncertainty and provide a basis for the planning we can do today we also provide 12 principles you can apply when forecasting to get better results theresa chiechi investopedia