Wall Street strategists dedicate significant time and effort to forecasting financial markets with some sense of precision. In my post last January 15th, 2023 titled “Wall Street Strategists’ 2023 Outlook (Guess)”, I indicated that Wall Street strategist forecasts were just guesses and putting any real faith in them may be futile.
Below are the forecasts from various investment firms and their forecasts for the S&P 500 Index at the beginning of 2023.
The median forecast? 4100 The actual year end value of the S&P 500 Index? 4769.83
A difference of 16%. Ouch! Some firms were closer but under forecasted, and some were far off the mark, significantly underforecasting the year end value. Forecasters often prefer underforecasting to hedge against bullishness, but 2023 was particularly challenging.
Wall Street Strategist S&P 500 Index Forecasts for 2023
Source: CNBC1
S&P 500 Index for 2023
Source: Stockcharts.com, retrieved 1/9/2024
At the start of a new year, Wall Street strategists are paid to come up with a forecast for the markets. Investors and Wall Street clients seek something to rely on, regardless of the typically wide range of forecasts, where someone will be closest to correct, and someone will be significantly wrong. The problem is no one knows which forecast will be correct/incorrect or how close / wide off the mark the forecast might be.
In my opinion, focus on the long-term, not these short-term forecasts that can be way off the mark. Who knows what the equity markets will do over the next day, week, month, quarter or year.
Instead of focusing on the short-term noise, consider creating an investment process to invest in or allocate to an existing strategy that allocates to a diversified set of high quality growing companies and hold until something materially impact your investment thesis. You need to be patient as a long-term investor, but mistakes made by trying to guess the short term could end up being detrimental to your longer-term success.
Sources
1. CNBC. CNBC Market Strategist Survey. WALL STREET’S 2023 OUTLOOK. Retrieved from https://www.cnbc.com/market-strategist-survey-cnbc/, January 15, 2023.