Just focus on what you can control

I read as many economic and market forecasts around the start of the new year as I can.

The exercise is useful for my work. The reviews and forecasts help clarify my own thinking. For example, the consensus forecast by a wide margin is that the economy will sink into recession in 2023. Forecasters disagree about the potential severity of the downturn rather than the odds of a recession. The reasons behind the downbeat forecast are powerful, but I'm still betting on the resilience of the U.S. economy. I think there's a good chance the economy will skirt a recession in 2023 and inflation will come down faster than anticipated (with critical caveats attached to the course of war in Ukraine).

That said, you should ignore what I think about the economy and markets, as well as more detailed forecasts, when it comes to making your money decisions in 2023. Forecasters can't control the business cycle, the moods of investors, or pierce the fog of uncertainty about the future. Concentrate on what you can control.

I recently came across a good illustration of what I mean. At Berkshire Hathaway's annual shareholder meeting in April, audience members wanted to know what assets were best for beating inflation. Warren Buffett, Berkshire's chief executive and legendary investor, made some remarks about the difficulties in anticipating how economic events will play out. How you and I experience rising prices each time may be similar, but the factors driving prices higher, responses by consumers and businesses to inflationary pressures, and how assets react can differ, noted Buffett. Given that insight "a person's best bet against inflation is improving their personal skills set," he said. "People will pay for skills, whatever the economy looks like."

Buffett got to the nub of the issue: Focus on what you can control and take actions that will make a difference to your livelihood or quality of life over the long haul. He could have highlighted other steps, such as paying down debts. But I like his emphasis on investing in your human capital—your job skills and your knowledge. Investing in developing your personal skills throughout a career pays off, including during the transition into the retirement years since many people continue to work, at least part-time.

Outside the wealthiest sliver of society, the earnings you generate from your skills on the job will swamp the returns you'll receive in your investment portfolio.

Farrell is economics contributor to the Star Tribune, Minnesota Public Radio and American Public Media's "Marketplace."