{"id":9984,"date":"2021-11-14T21:27:43","date_gmt":"2021-11-14T21:27:43","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=9984"},"modified":"2022-02-26T13:05:37","modified_gmt":"2022-02-26T13:05:37","slug":"why-bold-market-predictions-rarely-pan-out","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/why-bold-market-predictions-rarely-pan-out\/","title":{"rendered":"Why Bold Market Predictions Rarely Pan Out"},"content":{"rendered":"\n<p>22 years ago, James Glassman and Kevin Hassett published a\nbook titled, <em>Dow 36,000: The New Strategy for Profiting from the Coming Rise\nin the Stock Market<\/em>. In the book, the two authors claimed the Dow Jones\nIndustrial Average should hit 36,000 almost \u201cimmediately,\u201d even though at the\ntime the Dow was trading just above 10,000. It was 1999, however, when euphoric\nsentiment about stocks was quite common, and many investors thought the market\ncould only go up.<sup>1<\/sup><\/p>\n\n\n\n<p>Everyone knows what happened just a year later. The bold,\nbullish prediction of Dow 36,000 was followed by the tech bubble bursting in\n2000. The Dow would not reach the authors\u2019 forecast level until November 2021.\nThe prediction was 20+ years early, and dead wrong.<\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2021_11_15&amp;content=stock_market_outlook_report   \">Focus On This Data Instead of Short-Term Market Uncertainties<\/a><\/strong><\/p>\n\n\n\n<p>Are you looking for the right time to invest, especially as the\nnew year approaches? It\u2019s important for investors to focus on the long-term,\neven in the face of short-term uncertainties. <\/p>\n\n\n\n<p>As 2022 rapidly approaches, I suggest focusing more on the\nhard data and economic indicators that could impact your investments long-term.\nTo help you do this, I am offering all readers our just-released Stock Market\nOutlook report. This report contains some of our key forecasts to consider such\nas:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>Zacks Rank S&amp;P 500 sector picks<\/em><\/li><li><em>Zacks view on equity markets<\/em><\/li><li><em>What produces 2021 optimism?<\/em><\/li><li><em>Zacks forecasts for the remainder of the year<\/em><\/li><li><em>Zacks Rank industry tables<\/em><\/li><li><em>Sell-side and buy-side consensus<\/em><\/li><li><em>And much more<\/em><\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!&nbsp;<br> <strong><br>IT\u2019S FREE.&nbsp;<\/strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2021_11_15&amp;content=stock_market_outlook_report   \">Download the Just-Released November 2021 Stock Market Outlook<\/a><strong><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2021_11_15&amp;content=stock_market_outlook_report   \">2<\/a><\/sup><\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p>Glassman and Hassett were not necessarily unqualified to\nmake stock market predictions. Mr. Glassman is a former undersecretary of state\nand the founding executive director of the George W. Bush Institute, and Mr.\nHassett is a former Fed economist who served as Chair of the Trump\nAdministration\u2019s Council of Economic Advisors. Both are well-versed in economic\nand market matters, but they made an emotionally-charged error forecasting\nshort-term, 100+% gains in a market that was already notably detached from fundamentals.\n<\/p>\n\n\n\n<p>There are numerous other examples of bold forecasts from\ncredible market and economic experts gone wrong. One is from 1929, when one of\nthe U.S.\u2019s top economists, Irving Fisher, declared that stocks had hit a\n\u201cpermanently high plateau,\u201d implying that the only direction from there was up.\nSimilar to Glassman and Hassett, Mr. Fisher made his prediction at the tail end\nof the Roaring \u201820s, when positive sentiment was very high. The market began\nits crash two weeks later, which would eventually give way to the Great\nDepression.<\/p>\n\n\n\n<p>In 1981, there was a well-known technical analyst named Joe\nGranville that penned a popular newsletter about stocks and trading. At the\nbeginning of the year, he urged his readers to sell everything, and he remained\nbearish \u2013 incorrectly \u2013 throughout the memorable 1980s bull market run. He\ncontinued to wrongly refer to the bull market as a \u201csucker\u2019s rally,\u201d and was\nnever proven right. <\/p>\n\n\n\n<p>Finally, a more recent example took place in the summer of\n2012, when the famed bond manager Bill Gross wrote that \u201cthe cult of equity is\ndying,\u201d and that \u201cinvestors\u2019 impressions of \u2018stocks for the long run\u2019 or any\nrun have mellowed.\u201d This declaration of the death of equities came in the early\nstages of what might be considered the longest bull market run of history,\nwhich is arguably still underway today. Since that forecast was made, the\nS&amp;P 500 is up well over +200%. <\/p>\n\n\n\n<p>The point of recalling these forecasts is not to admonish\nthe economist or investor who made the prediction. The point is to remind\ninvestors that bold market forecasts should be taken with a grain of salt, <em>especially<\/em> those with set price targets,\nspecific dates, or predictions of massive gains or losses over a short period. <\/p>\n\n\n\n<p>These bold, flashy forecasts often garner the most attention\nbecause they are just that \u2013 bold and flashy. But believing them can lead to\nrash and risky decision-making. In 1929, Mr. Fisher borrowed thousands of\ndollars to make his bullish wager, which ultimately bankrupted him a decade\nlater. <\/p>\n\n\n\n<p><strong>Bottom Line for\nInvestors <\/strong><\/p>\n\n\n\n<p>Investors do not need bold forecasts in order to do well in\nthe stock market and ultimately reach long-term financial goals. <\/p>\n\n\n\n<p>From 1928 to 2020, the average annual geometric return on the S&amp;P 500 was 9.8%. Over the same period, the average geometric return of risk-free 3-month Treasury bills was 3.3%.<sup>3 <\/sup>Comparing the two shows investors the &#8220;risk premium,&#8221; which tends to hold across different periods of time and across different countries. Throughout history, it has been reasonable to expect that stocks \u2013 over long stretches of time \u2013 can generate a 6-7% annualized premium above Treasuries. The effect of this excess return, when compounded, is what leads to wealth generation. <br> <br>Unfortunately, investors have difficulty staying the course. We know equity markets experience average intra-year corrections of -14.3%,<sup>4<\/sup> a bear market every few years, and once a decade, investors can expect unbridled white-knuckle panic in the equity markets. Many of these events spook people out of stocks, which compromises the ability to effectively capture the risk premium over time.<\/p>\n\n\n\n<p>Recent history is a great example of the challenges investors\nface in committing to stocks long-term. In the past 15 years, we\u2019ve experienced\nthe Global Financial Crisis of &#8217;08 and a steep, pandemic-induced bear market.\nBut what is important to realize \u2013 which can only really be seen in retrospect\n\u2013 is that the best course of action in a crisis is to buy stocks. It is effectively\nthe Baron Rothschild quote, \u201cBuy when there\u2019s blood in the street, even if the\nblood is your own.&#8221;<sup>5<\/sup> <\/p>\n\n\n\n<p>For many investors, this mantra is easier said than done, but the takeaway is the same: the history of the United States is the triumph of the optimists, and for investors trying to generate true wealth in the market, the key is to invest and stay invested over long periods of time, regardless of market fluctuations. The past fifteen years of market returns is a clear vindication of such a strategy. <\/p>\n\n\n\n<p>To help you stay focused on your long-term financial goals instead of short-term market forecasting, I am offering all readers our<a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2021_11_15&amp;content=stock_market_outlook_report   \">&nbsp;<\/a><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2021_11_15&amp;content=stock_market_outlook_report   \">Just-Released November 2021 Stock Market Outlook Report<\/a>. <\/strong>This report can help guide you with key data points and economic indicators that could positively impact your investments in the long term.<\/p>\n\n\n\n<p>This report looks at several factors that are producing optimism right now and contains some of our key forecasts to consider such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>Zacks Rank S&amp;P 500 sector picks<\/em><\/li><li><em>Zacks view on equity markets<\/em><\/li><li><em>What produces 2021 optimism?<\/em><\/li><li><em>Zacks forecasts for the remainder of the year<\/em><\/li><li><em>Zacks Rank industry tables<\/em><\/li><li><em>Sell-side and buy-side consensus<\/em><\/li><li><em>And much more<\/em><\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!&nbsp;<br><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Every so often, someone generates headlines with an outrageous prediction &#8230; but they\u2019re almost always wrong.<\/p>\n","protected":false},"author":3,"featured_media":8874,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-9984","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9984","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=9984"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9984\/revisions"}],"predecessor-version":[{"id":10260,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9984\/revisions\/10260"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=9984"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=9984"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=9984"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}