Recently, the CFA Research Institute—a global association of investment professionals holding the Chartered Financial Analyst designation—offered the following observations from Joachim Klement, CFA:
At the beginning of 2018, a survey of strategists working at major banks around the globe indicated that their median predicted return for the S&P 500 in 2018 was 10.3%. The realized return for the S&P 500 was -4.38%. That is a return differential of approximately 14%—a breathtaking level of forecasting error from professionals who tout their valuation skills.
Global bank investment strategists predicted the return direction of the S&P incorrectly in 11 of the last 20 years. These results approximate those generated by a coin flip.
Anyone who claims to be able to predict stock markets over the coming year is, in my view, a charlatan selling snake oil. The reason that ‘guru’ is such a popular word is because ‘charlatan’ is so hard to spell.
From our founding in 1995, Schultz Collins has avoided making investment decisions based on market predictions. We advise our clients that chasing forecasted returns is a futile, and often costly, undertaking. If financial success depends on accurate market predictions, best to hire a fortune teller; otherwise, concentrate on maintaining a prudently diversified portfolio.