As we begin a new year, it gives us an opportunity to look back on the year in markets in 2024. It was a largely positive year across most asset classes, and we will review different parts of the 2024 market over the next few weeks during our Q1 blog series.
During preparation for this blog series, I was curious to look back at what the “experts” predicted for the stock market in 2024.
Where It Started: Predictions Versus Reality for the 2024 Market
Coming off a strong year for the stock market in 2023, expectations were muted for 2024, and many of the large investment firms predicted modest gains ahead. In fact, the consensus forecast for 2024 was that the S&P 500 would return 2% for the year.
Well, the S&P 500 roared forward again in 2024, with a total return of 25%. I would say we can call that a swing and a miss for those predictions!
How It’s Going: The Track Record of Market Forecasting
Digging deeper, the experts’ predictions tend to get it wrong more than they get it right. And that goes far beyond just the last few years.
The chart below shows the consensus forecast for each calendar year in dark blue, and then the difference between consensus and actual in light green.
It appears that missed forecasts are an annual tradition on Wall Street!
A Market Prediction Blind Spot?
Even more interesting to note is that the forecasters really struggle to foresee market downturns. Some of their least accurate prediction years are those in which the market had a negative total return.
As we begin the year, you will hear a lot of predictions for what will happen next, and they will not be lacking confidence!
However, you are rewarded as a long-term investor because of the uncertainty in the market, or in other words: risk. If we all knew the future of the market, there would be no “risk premium” to be had in the market.
2024 in Review: Perspective and Focus
The key to successful investing is perspective and to focus on the things you can control, such as your asset allocation, the time you spend invested in the market, how much you save, and how much risk you take with your portfolio. If you are interested in ways to keep a proper perspective in investing and financial planning, check out our blog on the topic.
To shape that perspective for 2025 and beyond, we look forward to this upcoming blog series, including pieces on the 2024 Stock Market in Context, Performance of the Premiums, International Markets, and Fixed Income concerns.
If you have questions about your portfolio performance or wish to talk to our team, please contact us. We are honored to partner with you on your investing journey!
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