Serious Money Chris JohnsWhere equity markets go from here will be largely determined by the macroeconomic newsflow from around the world.

Today's employment report from the US will set the scene for many markets, with investors hoping for just enough growth: too much will scare the Federal Reserve into faster interest rate hikes and too little will reawaken fears over a consumer-led slowdown.

Further afield, Asia's outlook is now dominated by the news from China - Japanese data receives less attention than Chinese.

Closer to home, Europe is an economic mess, but this has to be set against stock markets trading close to multiyear highs - equities are suggesting that the worst may be behind us.

The importance of the bigger picture cannot be denied. It's why the world's largest investment banks employ large teams of economists. Guidance on the overall direction of markets is important to asset allocators. Stock pickers also need help, particularly with style-based decisions. Whether to buy cyclicals or defensives is usually a simple call on the economic cycle.

The problem, of course, is that all of this requires forecasting. Movie mogul Sam Goldwyn exhorted us to "never make forecasts, especially about the future". Economic forecasters have never paid the slightest attention to Goldwyn and are ready and willing to supply an ever-eager audience - financial markets - with the results of their crystal-ball gazing.

Peter Lynch, one of the most successful money managers of his generation, always argued that 10 minutes spent thinking about the economy was 10 minutes wasted. He preferred to pick individual companies based on a careful analysis of income statements and balance sheets. The business cycle, according to Lynch, is unforecastable and, therefore, not worth thinking about.

Despite having a lot of sympathy with Lynch's views, many market participants still remain heavy users of economic forecasts for a host of reasons. It usually comes down to time - we can only ignore the business cycle if we have deep enough pockets to ride one out.

If we buy the "best" companies today, based solely on studies of their accounts, we will probably have a winning portfolio, but only after many years have passed. Most investors feel the need to know, for example, if it is still a good idea to buy mining stocks?

If economic growth is likely to continue at a reasonable pace for the next few years, stocks such as BHP and Antofagasta are well worth buying now; if a recession is imminent, we don't want to go anywhere near these sorts of names.

If we have the capacity to buy either of these companies and forget about them for 10 years, I would have every confidence that the investment will make good money. But who really has that kind of horizon? It's unfortunate, but the reality is that economic forecasters are a necessary evil.

I say evil, not to be gratuitously rude, but more to point out that even the economists acknowledge the problems associated with forecasting. I used to have the word "economist" on my business card but have been forecast-free for a decade now. Some of my best friends still are economists and I know them to be dedicated hard-working professionals and most of them would agree that forecasting is a very difficult game to play well and few succeed.

However, even Lynch would probably acknowledge that behind most investments lurk economic guesstimates about the future. That is one of the many paradoxes of financial markets.

As a matter of fact, the biggest macro concern facing all financial markets today isn't a forecast. Rather, it is the lop-sided nature of global growth. Its most obvious manifestation is the balance of payments deficit being run by the US. The counterparts of this deficit are the surpluses being run by China and other large trading partners of the US - hence all the furore about the Chinese currency and US pressure for its revaluation.

But how big a problem are these deficits and how should ordinary investors factor them into their decision making? If forecasters give the profession a bad name, the competing analyses of the US deficit problem are enough to make us despair that economists are capable of saying anything useful at all.

The best description of what I mean is to be found in a recent paper by a very well known US professor, Nouriel Roubini (his website is ranked the "best in the world"), which lays out five different versions of the US deficit problem. Actually, in some of these versions it is not a problem at all.

Roubini goes through the Fed's take on the issue, which sees it as one of surplus saving in Asia - the US is simply doing the world a favour by absorbing these excess savings. The problem will go away, probably painlessly, when the rest of the world starts to consume more and save less.

Next, there is a bunch of former International Monetary Fund economists, now working for Deutsche Bank, who see the current global monetary set-up as a "Bretton Woods II": the Chinese have a fixed exchange rate with the dollar so the deficits are much less of a problem than meets the eye.

By contrast, we have Steve Roach of Morgan Stanley leading the pack of doomsters who lay the blame squarely with deficient saving in the US and see economic Armageddon immediately around the corner.

The other variants are more nuanced and are mainly involved with arguments about the need for China to revalue.

The article is beautifully written, if a little pretentiously (it likens the analysis to a famous Kurosawa film, Rashomon, which is a reworked tale of how different people can look at the same phenomenon and come up with completely contrasting versions of fact). But, for all its elegance, it supplies us with no useable information.

As investors, we can learn nothing from the best contemporary account of the most important macro issue facing global markets. If economics didn't exist, would we invent it?

Chris Johns is an investment strategist with Collins Stewart. All opinions are personal.