We don’t even know what tomorrow will bring, but Wall Street loves to try and predict what will happen next year.
Every year analysts come up with forecasts about the future. They turn around and do it again several months later for their mid-year outlooks.
Funny thing is they don’t always get it right.
There must be money in this or something? Don’t blame the money though. It’s us humans that love it so.
We crave to know and reach beyond our self-evident limitations.
How’d they do last year? Bad.
One Market Watch reporter recounted how bad:
“Wall Street often gets it wrong when it comes to anticipating where stocks might be trading one-year out. But in 2022, its forecasters were set to miss the mark by the widest margin in nearly 15 years, according to data compiled by FactSet.
Wall Street equity analysts were on pace to overestimate the performance of the S&P 500 index in 2022 by nearly 40% as of Tuesday, according to the average bottom-up forecast compiled by FactSet’s senior earnings analyst John Butters. That would mark their biggest miss since 2008 when analysts overshot by 92%.”1
We still want to know though. Forecasting will not go away, and our desire to tune in to someone with pedigree who thinks they know won’t either.
Bloomberg has been compiling a massive list every year of what Wall Street thinks, and after going through nearly all the outlooks for 2023 the summary is not great: “upbeat forecasts are hard to find, threatening fresh pain for investors who’ve just endured the great crash of 2022.”2
Pain. Didn’t we just do that?
Remember though: many of the same forecasters were mostly wrong about last year. Bloomberg continues: “Still, humility is the order of the day for prognosticators who largely failed to predict the 2022 cost-of-living crisis and double-digit market losses. This time around, the consensus could prove badly wrong once again, delivering a host of positive surprises.”3
Positive. Now that’s a P word we can get behind!
The point is: no one knows. So don’t guzzle the latest thing you heard as if its gospel.
Hard to say it better than Warren Buffett said it three decades ago in one his Berkshire Hathaway letters: “We've long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie [Munger] and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”4
Don’t drink the poison.
You know what’s kind of humorous though about Mr. Buffett’s quote? It’s written right after he makes a prediction.
Enough predictions for now. Here comes some data.
Ben Carlson, a Certified Financial Analyst, points out that in the past stock market losses are followed by losses only 9% of the time.5 Furthermore, stock and bond markets have not fallen two years in a row at the same time.6
Read those two sentences again.
They are not predictions and guarantee nothing about the future, but they remain historical statistics rather than the latest purported prophecy.
Now what?
Invest consistently. Save for emergencies. Think long-term. Cut out the noise.
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Source:
- https://www.marketwatch.com/story/wall-streets-stock-market-forecasts-for-2022-were-off-by-the-widest-margin-since-2008-will-next-year-be-any-different-11671583416
- https://www.bloomberg.com/graphics/2023-investment-outlooks/
- Ibid.
- https://www.berkshirehathaway.com/letters/1992.html
- https://awealthofcommonsense.com/2022/12/how-often-is-the-market-down-in-consecutive-years/
- Ibid.