For example, in 2018 the market fell 6.9 percent, even though forecasters said it would rise 7.5 percent, a spread of 14.4 percentage points. In 2002, the forecast was up 12.5 percent, but stocks fell 23.3 percent, a spread of nearly 36 percentage points.
All told, the median Wall Street forecast from 2000 to 2020, including such gaps, missed its target by an average of 12.9 percentage points – more than double the actual average annual performance of the stock market.
Year after year, these predictions are about as accurate as those of a weatherman who calls for mild sunshine in a city that rains or snows about 30 percent of the time. Some predictions!
Put it politely, Mr Hickey said, “The fact that the average gap between analyst forecasts and actual market performance this year is over 12 percentage points is in and of itself quite damaging.” When strategists are that far off target he added, “What’s the point of the goal anyway?”
I would say these goals are worthless and would avoid stock market bets based on “expert” assessments of where the market is going from day to day or even year to year.
That may sound bleak, but I, too, remain essentially optimistic about the stock market over the long term. Since the market has risen rather than fallen far more frequently for many decades, I think it is sensible, if risky, to make long-term bets that it will rise in the future. The underlying assumption is that despite the tragedies and setbacks we have seen this year, the global economy will continue to grow and public corporations will generate profits that will flow into the hands of investors.
For this reason, I continued to invest money in stocks and bonds during this time of pandemic, economic upheaval, and social and political struggle. As always, I invest in a well-diversified, low-cost portfolio consisting mainly of index funds that reflect the performance of the global financial market.