Each December, since 2000, the median forecast never called for a stock market decline over the course of the following calendar year. But the market did fall in six separate years in that period, or about 29 percent of the time. (That’s roughly in line with the long-term stock market average: Vanguard has found that from 1926 through 2019, the stock market fell in 27 percent of calendar years.)
In 2018, for example, the market fell 6.9 percent, though the forecasters said it would rise 7.5 percent, a spread of 14.4 percentage points. In 2002, the forecast called for an increase of 12.5 percent, but stocks fell 23.3 percent, a spread of almost 36 percentage points.
All told, when gaps like that are taken into account, the median Wall Street forecast from 2000 through 2020 missed its target by an average 12.9 percentage points — which was more than double the actual average annual performance of the stock market.
Year after year, these forecasts are about as accurate as those of a weatherman who always calls for balmy sunshine in a city where it rains or snows about 30 percent of the time. Some forecasts!
Mr. Hickey put it politely: “The fact that the average spread between analysts’ forecasts and the actual performance of the market in that year is over 12 percentage points, I think, is pretty damning, in and of itself.” When the strategists are so off target, he added, “What good is the target in the first place?”
I’d say these targets are worthless, and would avoid stock market bets based on “expert” appraisals of where the market is heading day-to-day or even year-to-year.
That may sound grim, yet I, too, remain essentially bullish about the stock market over the long run. Because the market has risen far more frequently than it has fallen, for many decades, I think it is reasonable, if risky, to make long-term bets that it will rise in the future. Underlying that assessment is the assumption that, despite the kinds of tragedies and setbacks we’ve seen this year, the world economy will keep growing and public companies will make profits that will flow into investors’ hands.