I’ve written before about why market predictions are largely useless, using Bill Gross as an example. Even if he is right, and we are in a New Normal of subpar investment returns for a number of years, most asset class prices will still rise and fall significantly throughout the year. Active investors can attempt to be opportunistic throughout the year, but even passive investors using dynamic cash allocation strategies can at least attempt to spot good values and put more cash to work in the market during that time white remaining passive with their other holdings.
As Exhibit B to why market predictions are largely useless, I want to briefly run through ten different year-end predictions that I’ve pulled up. I will be writing about them as I read them, so I don’t know how this will turn out, but I suspect that they will be wildly inconsistent.
- Schwab: U.S. stocks will continue to do well but developed foreign stocks will underperform. Focus on market reactions to political shocks abroad.
- USA Today survey of 15 strategists: S&P 500 will gain about 4-5% in 2017, but none of the strategists predict a loss for the year (which is crazy for me…the odds of a loss for the year when the market is at an all time high both in price and nearly in valuation has to be significant).
- Raymond James: U.S. earnings growth will finally resume and become a major driver of the economy and a continued bull market. Any market pullbacks are for buying.
- James Rickards: Stock market correction is on the horizon and the Fed will have to reduce interest rates. Own gold and U.S. treasuries.
- Marc Faber (noted permabear): Overweight emerging markets and Europe (contrary to Schwab above).
- Barclays: The S&P 500 will rise 7%, healthcare is most undervalued sector.
- Credit Suisse: Investors are overweight bonds and underweight stocks when they should be the opposite. The stock market will go down in the second half of 2017 due to US bonds and the labor market, but stocks are still preferable to bonds and gold.
- Goldman Sachs: U.S. stocks flat for 2017, Asia stocks excluding Japan have the highest expected returns.
- Kiplinger: U.S. stocks will return about 5%.
- Blackrock: U.S. stocks and emerging market stocks will outperform bonds and bond-like equities.
So the two most bearish personalities are predicting gloom as always, but none of the others are predicting a stock market drop, much less a correction in 2017, which surprises me. There is more consistency than expected in terms of how the U.S. stock and bond markets will perform, but not as much about how emerging markets and foreign stocks will do. It will be interesting to revisit this article at the end of 2017 and see how they did.