As we approach the end of the year, those of us who follow the financial media are inundated with year-end forecasts. I read most of them to look for clues about what might come next.

They’re fun, if you’re into that sort of thing. Some are thoughtful, some are entertaining, many are confident —and almost all are wrong.

That’s not because analysts lack intelligence or data. It’s because the future, especially in financial markets, is inherently unpredictable.

Even if we could predict such important aspects of the future as the rate of inflation, GDP growth, unemployment, or any other economic factor, we still couldn’t accurately forecast how financial markets would respond. Economics is full of what we call second- and third-order effects.

If we knew unemployment was going to rise, would that be good or bad for the stock market? On the surface it seems obviously bad, since more people would be unemployed and spending would decline. But then maybe the Federal Reserve would come in and lower interest rates, which could be a boost for stocks. But then inflation could get out of hand, which would lower consumer spending… and so on. We just can’t predict the chain of events that would follow.

Take this year as an example. Heading into 2025, a consensus was forming that deregulation and tax breaks might boost U.S. stock returns. Most investors dismissed the potential for tariffs to hurt the markets.

Then came “Liberation Day,” when Trump announced huge tariffs across dozens of countries. The unexpected trade policy shifts quickly became front and center in financial markets. The S&P 500 dropped by almost 20 percent in less than two months as the narrative shifted to a potential global economic meltdown.

Just as surprising was the rapid recovery many weeks later. And investors suddenly shifted their focus to the promise of artificial intelligence. Despite the economic pressures of the trade war, the new consensus was that spending on the AI buildout could support economic growth almost singlehandedly.

Stocks with exposure to AI soared. Google stock was down 23 percent for the year through April 8. As of mid-December, Google stock is now up 63 percent for the year. This is just one example of an unpredictable reaction to changing narratives. It seems obvious only in hindsight.

It can be a valuable exercise for financial professionals and investors to think about what might happen next. But it would be folly to put too much faith in our ability to predict the future. Even so, we shouldn’t let the unpredictable nature of financial markets make us complacent. We don’t know where the market is headed next year, but we do know where we stand today.

And where we stand today is that we’ve just had three very good years in the U.S. stock market. This isn’t unprecedented, but we’ve seen market growth well in excess of the long-term average. Despite the tariff meltdown, the three-year return on the S&P 500 has been about 76 percent.

Much of this growth has come from AI spending. The broad market has been driven higher by names such as Nvidia, one of the biggest and most obvious beneficiaries of the AI revolution. Tech indexes have more than doubled in the last three years. There is a lot of handwringing about whether these tech stocks can continue to drive the market, as investors have gotten jittery about the AI theme.

Questions are now swirling about whether AI darlings are overvalued. Are their huge increases in market value truly justified by financial fundamentals, or have we gone too far? We’ve begun to see rotation out of the best tech stocks and into more value-oriented stocks such as banks and health care.

We can’t know what the future holds, but we know we’ve seen tremendous growth in the last few years, and we know that prices are now revealing a changing mindset.

This information is useful in the context of a financial plan. If you’re a retiree who relies on your investment portfolio to support your living expenses, there is nothing wrong with using this information to take some gains in tech stocks and reallocate to something more secure. That’s not a prediction of what’s to come — it’s an acknowledgment of where we are.

The artificial intelligence buildout may still be in its infancy, and more gains could be on the way. But we can’t know for sure one way or another.

We don’t need to guess correctly which direction we’re headed tomorrow. The goal is to understand where we are today, assess how much risk we’re taking, and make decisions that align with our financial lives.

In an unpredictable world, that kind of discipline matters more than ever.

Luke Delorme is director of financial planning at Tableaux Wealth in Stockbridge. Reach him at (413) 264-2404 or Luke@TableauxWealth.com.