| At the beginning of every year, we’re regularly asked ‘what do you think this investment year will bring?’. Of course, we respond with ‘nobody knows, and markets are efficient so everyone’s guesses are already priced in’. But as an evidence-based firm we like to have some data to back this up. Let’s start with the US market in the year just gone: how well did the so-called ‘experts’ fare?
At the end of 2023, top US banks and brokers were asked to predict where the S&P 500 index would be at the end of 2024. The average prediction was for the index to hit 4860 – in fact the index stood at 6091 at year-end – some 25% higher. In fact, not one of the banks or brokers even came close. The most bearish forecast was from JPMorgan, the biggest bank in the world with access to some of the smartest minds and more data and information than anyone else. What did they foresee? Lacklustre earnings growth (2-3%), rising geopolitical risks, softening economic demand, and a price target of 4,200 with a “downside bias.” In fact, 2024 saw earnings growth of 10%, stronger-than-expected economic growth, and a significant boost in investor optimism. At the start of the year, who could have foreseen this combination of events? No one, which is precisely why you shouldn’t invest based on predictions. |
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