CKBlog: The Market

Wednesday, February 17, 2021

Look Out for Outlooks 2021 Edition

by Steve Haberstroh, Partner

It’s that time of year again where strategists are paraded on TV to share their predictions for the market in 2021. Ignore them. For the last four years I have documented their accuracy. And while these folks are no-doubt brilliant and have access to the world’s best minds and data, their predictions (guesses) have, on average, missed the mark by a wide margin.

This past year was particularly difficult as the predictions were made in late 2019 before:

So how did these Wall Street Wizards do? The blue bars in the chart below, sourced from Bloomberg, were the predictions of strategists back in December 2019 for where the S&P 500 Index would close on December 31, 2020. In red is where it actually closed.

2020 S&P Price Forecast

The S&P 500 Index closed at 3,756.07, up 18% on the year.
The best guess was 3250 from Credit Suisse (they were roughly 9% below the mark).
The worst guess was 3,000 from Morgan Stanley and UBS (20% below the mark).
The mean of guesses was 3,280 (roughly 12.5% below the mark).
The median was 3,300 (roughly 12% below the mark).

It’s interesting to note that strategists were about as bad last year as in previous ones.

Average predictions for 2017 were off by 14%.
Average predictions for 2018 were off by 12.8%.
Average predictions for 2019 were off by 8%.
Average predictions for 2020 were off by 12.5%.

The point here isn’t to criticize. I readily admit I couldn’t do any better. But this I am certain of: Going into 2020, if told we’d experience the worst global pandemic in 100 years, exactly zero of these strategists would have made a more accurate guess. Imagine trying to convince your boss and clients that a global shutdown would result in double-digit gains?

Armed with seemingly the most important information, we are still left powerless against the market’s short-term mood swings.

2020 Edition
2019 Edition
2018 Edition