How Good Are Experts at Predicting the Stock Market?

[Wrestleknownothing]

Every year at about this time Bloomberg gathers predictions for where the S&P 500 Index will end one year hence. To do this they poll market strategists from a variety of firms like Bank of America, Goldman Sachs, Morgan Stanley, JP Morgan, etc. From year to year they have roughly 12 to 20 participants in the survey. In addition to tracking their individual predictions Bloomberg tracks things like the high, low and median predictions.

For example, yesterday they published the results from 19 strategists. With the S&P 500 Index currently around 4770 the low prediction for 12/31/2024 is 4,200 (-12%), the high is 5,200 (+9%), and the median is 4850 (+2%). These predictions tend to make headlines. And there is this idea that the experts know best. So I imagine some investors use these estimates to make investment decisions. On the flip side anyone who studies the market knows that market timing is brutally difficult. 

So I thought I would take a look at a brief history of these expert predictions to see how accurate they are.

Here is a graph of the high, low, and median predictions combined with the realized returns:

Interestingly, the most bearish prediction is not bearish enough three of twelve years and the most bullish prediction is not bullish enough six of twelve years. That means that only 25% of the time in the last twelve years were the actual results for the S&P 500 Index within the range of expert estimates.

Buyer (and seller) beware.

Note: These are all price returns and 2023's final return hasn't quite been written yet.

[mspart]

You want predictions?  Come to me.   Buy high sell low is my mantra!!

mspart

[ionel]

If I were an Iowa wrestler I'd bet $2k its up 30%.

For my own money I'd bet $10k that SCOTUS overturns the Colorado Court and I'd bet an extra $2k it goes 9-0.   Given I'm in Colorado right now would think I can get really good odds. 

[mspart]

I would have bet on the market by the early indicators today.   But I would have been wrong.   Tanked in the last hours. 

Like I said, buy high sell low, that's the way to go. 

mspart

[Wrestleknownothing]

5 minutes ago, mspart said:

I would have bet on the market by the early indicators today.   But I would have been wrong.   Tanked in the last hours. 

Like I said, buy high sell low, that's the way to go. 

mspart

I hope you aren't trying to time one day moves.

[jross]

The experts record is bad.  Buy a handful of companies you believe in and hold through the cycles.

The market is not regulated enough from manipulation in the dailies.

I am interested in a small investors club or open discussion here if anyone else is.  A way to share due diligence and interesting info.  A way to share what not to do.

or buy the indexes and leave it alone…

Edited December 21, 2023 by jross

[mspart]

17 minutes ago, Wrestleknownothing said:

I hope you aren't trying to time one day moves.

I only really look at my 401k.   It starts to go down over a period of time I get stuff out of the market.   When the  market picks back up for a period of time, I get back in.   Hopefully not buying high and selling low in the process.   It has worked for me so far.   Playing with fire though I know. 

mspart

[ionel]

40 minutes ago, mspart said:

Like I said, buy high sell low, that's the way to go. 

mspart

Let me know when you are ready to sell low, I'm interested in buying. 

[Offthemat]

Best advice I ever got was reading that Paul Polosi bought a bunch of Nvidia stock.  It was around 17, now 45.  

[Wrestleknownothing]

3 minutes ago, Offthemat said:

Best advice I ever got was reading that Paul Polosi bought a bunch of Nvidia stock.  It was around 17, now 45.  

? 

It closed today at 481

[jross]

14 hours ago, jross said:

The experts record is bad.  Buy a handful of companies you believe in and hold through the cycles.

The market is not regulated enough from manipulation in the dailies.

I am interested in a small investors club or open discussion here if anyone else is.  A way to share due diligence and interesting info.  A way to share what not to do.

or buy the indexes and leave it alone…

 

[mspart]

I read a little, I watch the market.  Who saw yesterday coming?  No one.   Not the experts.   Everyone was saying the bull continues to run when the big bad bear swatted him a good one.  

mspart

[Wrestleknownothing]

3 minutes ago, mspart said:

I read a little, I watch the market.  Who saw yesterday coming?  No one.   Not the experts.   Everyone was saying the bull continues to run when the big bad bear swatted him a good one.  

mspart

A few option strategists are blaming yesterday's late move on zero day option hedging. FWIW.

[mspart]

That's hindsight.   Did they see it coming?   I don't think so.  

The stock market is gambling with better odds than a casino gives.  

mspart

[Wrestleknownothing]

26 minutes ago, mspart said:

That's hindsight.   Did they see it coming?   I don't think so.  

The stock market is gambling with better odds than a casino gives.  

mspart

They are zero day options. No one sees that coming by definition.

The idea that the stock market is a casino leads to two incorrect decisions.

1. People treat it like a series of bets and over trade. More money is lost trying to time the market than almost any other strategy. 
2. And people avoid investing in the stock market. This is actually the bigger money loser than market timing. The stock market is a wealth creator. What casino consistently doubles your money every 7 to 10 years?

[mspart]

I've been investing via 401K for my whole career.   There was a period when I did not trust the market and got out, put all of the money into and effective savings account.   Unfortunately, I stopped looking at what was happening and lost out on some serious gains until I got back in.   That was roughly 10 years ago when I got back in and I have more than doubled my money.   Granted I continue to put in, but the market has gone up that much.  I keep a spreadsheet now everyday and look at daily and weekly trends, mostly the weekly to make any decisions.   If the market is tanking for a few weeks or more, I may pull some or all out, and then if it goes up for some weeks I may get back in.   That's timing the market but not on a daily basis.   But I keep track of it all, even what all the funds are doing that are available to me so I can look at those and see if there are better options for me.  

mspart