But there is evidence that futures markets do predict future prices for some assets. A 2013 study by economists at the University of Wisconsin, Madison and the University of Texas, Austin found that energy futures tend to be more correct about coming energy prices than are the markets for other commodities. That outcome was in small part due to the fact that the energy futures market is well established, with many participants and lots of liquidity.
The study also found that the predictive nature of the futures market has diminished since the early 2000s.
Earlier research, in 2005, by economists at the San Francisco Federal Reserve, found that oil futures prices could be predictive of prices in the future, mostly in the near-term because, the economists hypothesized, there was more liquidity in the near-term futures markets rather than long-term.
Apparently, investors don't want to go out on a limb by betting on oil prices far into the future.
No one can consistently predict the future
When many investors want to make a deal around one price level, all of that interest can indicate that there is a consensus about what is going to happen over the next couple of months and years. That can be predictive but it's not always right.
"From my experience, that consensus is as often right as it is wrong," says Martin Froehler, CEO at Quantiacs, a platform for quantitative trading strategies.
No matter how much information participants in futures markets have, they cannot actually predict the future. Unexpected events blindside everyone.
How consumers use the information
Big investors such as banks and mutual funds have an economic interest in when the Fed acts to raise rates. Buying or selling 30-day fed fund futures is one way to mitigate interest rate risk. For everyone else, fed fund futures can serve as a predictive guide.
"If you think the Fed will raise rates in the future, you would sell these futures. If you think the Fed will lower rates, you would buy these futures contracts," says Pete Mulmat, futures expert and host on the Tastytrade Network.
CME Group, which offers the 30-day fed funds futures, takes it a step further with its FedWatch tool.
"Basically, the FedWatch Tool takes the price of the fed funds futures at some month in the future (and) turns it into an implied interest rate for the federal funds rate," says Bluford Putnam, managing director and chief economist of CME Group.
Absolutely no knowledge of the futures market is required to gauge the sentiment of the market. Will the Fed raise interest rates at the next meeting? Investors can look at the tool and quickly see what investors in the futures market think will happen.
Of course, it all could change based on a nearly infinite number of economic circumstances which could intervene to change the current trajectory.
"Futures can be a good indicator of market sentiment, but they shouldn't be your only source of information," says Charlie Shipman, managing principal at Blue Keel Financial Planning in Weston, Connecticut.