2019 Forecasting Follies
Over the last few years, we have enjoyed capturing the major banks’ annual S&P 500 Index forecasts, which come out each December. They get a lot of attention and many people make investment decisions off these views. Yet, few look back to see if they are any good at forecasting. So, before we look at 2020, let’s look back at the last few years.
2017 was a big miss for most banks as the S&P 500 had much stronger returns than banks anticipated (except one).
2018 must have been an interesting year for forecasters. As we rolled into December, most had under forecasted the market significantly – like the previous year – then came a major correction in mid-December, which left them ALL high for the year (even after a small bounce back).
2019 was mixed with most under forecasting again.
As we head into 2020, it is interesting that the range of forecasts has narrowed, and the expected change (upward, as is almost always the case for forecasts) is lower than in recent years. This could be wisdom (real insight that markets are maturing?) or caution (forecasters don’t want to be too wrong so just assume little change). Either way, when you look at the randomness of forecasts, you can see how “fun” this exercise can be, but also how unreliable it is for building an investment strategy.
