December 31, 2014
It's that time of year again, when market pundits predict how they think the market will perform in the coming year. Goldman Sachs weighed in with a prediction of anemic growth within U.S. indices in 2015. Barron's predicted a 10% growth rate in the S&P 500. The Jerome Levy Forecasting Center even came out with a bold prediction of a recession in 2015, as they predicted in both 1929 and 2007 (which makes you wonder what they predicted in the other 82 years not mentioned in that period).
Over the course of the last few days I have read about how falling oil prices will spur a rebirth of American consumerism and jump start GDP growth domestically. In juxtaposition to this, I have also read about how falling oil prices will potentially drag down global growth. Some predict that a slowdown in China may cause a global recession, as well as how renewed growth in China will certainly doom the U.S. to mediocre GDP growth.
One thing is for certain, no one can credibly guarantee how the market will perform in the coming year because there are simply too many variables to consider when evaluating future market performance.
Source: CXO Advisory Group
In the chart shown above, the cumulative accuracy of the 7,000 leading stock market predictors is 47.4%. That's right; if you try to time the market based on their guidance you will have a less than 50% chance of coming out ahead.
As an individual investor, how do you make sense of all of these contradictory prognostications about the market from experts selling themselves as stock market gurus? Having a frank and earnest conversation with your financial advisor about your long term investment goals and objectives (as well as a timeline to reach those goals) is certainly a step in the right direction. As I am sure you have heard before, timing the market is no better than gambling. A sound and secure investment strategy with clear goals and a balanced portfolio aligned with your risk profile is far more likely to be successful in the long run than following the latest prediction for the market.
Jai S. Ramachandran, Chief Executive Officer
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).