FROM OUR INVESTMENT COMMITTEE | 2017: Another Bad Year for Expert Predictions
By J. William G. Chettle, VP, Loring Ward
Every year, experts make bold pronouncements about the market and the economy. And every year, most of these predictions are wrong. If you had listened to the experts in 2017, you would have worried about global economic turmoil, a flat-to-disastrous stock market, even the end of the world. Instead, the U.S. economy continued to grow, most international markets were in positive territory, the S&P 500 returned 19% for the year, and the earth is still here.
Gurufocus.com tracks the performance of so-called market gurus, some of the best and brightest mutual fund and hedge fund managers in the world. Last year, the nearly 50 gurus tracked by Gurufocus.com returned 14.4%, almost 5% less than the S&P 500.* We believe it is better to focus on your long-term goals, and the ability of markets around the world to reward patient, diversified investors, than listen to the pundits and prognosticators and try to outsmart markets.
Here are 10 particularly bad predictions about 2017 that demonstrate the only thing we may be able to predict with confidence is that most predictions will be wrong.
1. “It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover? A first-pass answer is never… So, we are very probably looking at a global recession, with no end in sight.” Paul Krugman, New York Times, November 11, 2016
2. “Despite Trump euphoria, Wall Street’s 2017 forecast is the most bearish annual outlook in 12 years… Wall Street’s consensus S&P 500 forecast calls for a little more than a 5 percent gain in 2017.” CNBC.com, January 3, 2017
3. “Today’s stock market is priced at an all-time high and has been on a tear for eight years. My recommendation: Sell your stocks (and your long-term bonds, too) until the dust settles. If your stocks and long bonds are in retirement accounts, transfer them to short-term Treasuries.” Laurence Kotlikoff, Economist, Seattle Times, February 11, 2017
4. “With stock valuations high, it’s time to reduce your holdings.” Robert Shiller, economist at Yale University, CNBC, February 24, 2017
5. “The Fed has no clue, and will ruin us all… A $68 trillion ‘Biblical’ collapse is poised to wipe out millions of Americans.” Jim Rogers, co-founder of the Quantum Fund, Bloomberg TV, March 28, 2017
6. “This is one of the most dangerous market environments we’ve ever been in. It’s the calm before a gigantic, horrendous storm that I don’t think is too far down the road. The S&P 500 could easily fall to 1,600 [a 34% drop from current level].” David Stockman, former director of the Office of Management and Budget, CNBC, June 11, 2017
7. “It’s going to end extremely badly, with stocks set to plummet 40% or more…a gut-wrenching drop that would rival the greatest crashes in stock market history…. Investors are on the Titanic.” Marc Faber, Publisher, The Gloom, Boom & Doom Report, CNBC, June 23, 2017
8. “I have no stocks. I advise people not to invest in the stock market, not now. Way too dangerous.” Filmmaker Michael Moore, August 2017
9. “The S&P 500 has suffered a 7 to 10 percent decline in each year since 1995. I believe this year is no different — and that, in fact, such a decline is around the corner.” Matt Maley, equity strategist with Miller Tabak, CNBC, August 28, 2017
10. “I think Planet X is going to cause a whole series of catastrophes including asteroids striking the Earth…with one third of the grass and oceans and islands and so forth being destroyed…the US will probably be split in half, we will have experienced tsunamis, volcanic eruptions from Yellowstone, fire falling from the sky with trails of smoke, probably limited nuclear exchanges… I don’t think it’s going to be the same world.” David Meade, author and futurist, predicting a near collision between earth and an unknown planet, Late Night in the Midlands, September 30, 2017
The views expressed are those of Loring Ward and are not intended as investment advice, or a forecast or guarantee of future results. All investments involve risk, including the loss of principal and cannot be guaranteed against loss by a bank, custodian, or any other financial institution.