Most 2019 S&P 500 forecasts were too low

[willthrill81]

In December of 2018, Sam Dogen (the Financial Samurai) compiled the predictions of various 'experts' on where the S&P 500 would close at the end of 2019.



The actual closing price was 3,230.78.

The closest estimate was the second most bullish one, put forward by Keith Parker of UBS.

I put this forward only to show that seven of the eight estimates undershot the S&P 500's closing value for the year, four of them by more than 7%.

The mean estimated closing value was 3,056.25, which was still well below the actual closing value. So much for the wisdom of this crowd.

"It's difficult to make predictions, especially about the future."
- Danish proverb

[oldcomputerguy]

Side note, I just took a look at the final standings for the 2019 Bogleheads Contest, and except for four entries that were in the tens of thousands, every entry in the contest under-guessed the index's final number, some by more than others obviously.

https://www.lostoak.com/ls/diehards/con ... fault.aspx

Interestingly, Binky Chadha of Deutsch Bank ended up in fourth place and Keith Parker of UBS ended in seventh.

[bloom2708]

I missed low by 526 points for 2019. I'll stick to my dad j*b.

If I'm going to miss for 2020, I want it to be the same way. I pick a number and the S&P 500 trounces it.

[Steve Reading]

In December of 2018, Sam Dogen (the Financial Samurai) compiled the predictions of various 'experts' on where the S&P 500 would close at the end of 2019.



The actual closing price was 3,230.78.

The closest estimate was the second most bullish one, put forward by Keith Parker of UBS.

I put this forward only to show that seven of the eight estimates undershot the S&P 500's closing value for the year, four of them by more than 7%.

The mean estimated closing value was 3,056.25, which was still well below the actual closing value. So much for the wisdom of this crowd.

"It's difficult to make predictions, especially about the future."
- Danish proverb

I wonder if places like Morgan Stanley short the market based on predictions like these (since their prediction was for a closing that was actually lower than it start with).

If so, that’d be a fair amount of money lost :/

[rbaldini]

If it were me, I'd always guess the average historical market return of about 10%. That means I'll usually be pretty far off, but it's probably still a better estimate, on average, than many others. When the signal:noise ratio is very high, usually the simplest methods do the best.

[goblue100]

In December of 2018, Sam Dogen (the Financial Samurai) compiled the predictions of various 'experts' on where the S&P 500 would close at the end of 2019.



The actual closing price was 3,230.78.

The closest estimate was the second most bullish one, put forward by Keith Parker of UBS.

I put this forward only to show that seven of the eight estimates undershot the S&P 500's closing value for the year, four of them by more than 7%.

The mean estimated closing value was 3,056.25, which was still well below the actual closing value. So much for the wisdom of this crowd.

"It's difficult to make predictions, especially about the future."
- Danish proverb

I wonder if places like Morgan Stanley short the market based on predictions like these (since their prediction was for a closing that was actually lower than it start with).

If so, that’d be a fair amount of money lost :/

I see Morgan Stanley as being mildly optimistic. On January 1, 2019, the S&P 500 Index was 2506.85.

[Steve Reading]

In December of 2018, Sam Dogen (the Financial Samurai) compiled the predictions of various 'experts' on where the S&P 500 would close at the end of 2019.



The actual closing price was 3,230.78.

The closest estimate was the second most bullish one, put forward by Keith Parker of UBS.

I put this forward only to show that seven of the eight estimates undershot the S&P 500's closing value for the year, four of them by more than 7%.

The mean estimated closing value was 3,056.25, which was still well below the actual closing value. So much for the wisdom of this crowd.

"It's difficult to make predictions, especially about the future."
- Danish proverb

I wonder if places like Morgan Stanley short the market based on predictions like these (since their prediction was for a closing that was actually lower than it start with).

If so, that’d be a fair amount of money lost :/

I see Morgan Stanley as being mildly optimistic. On January 1, 2019, the S&P 500 Index was 2506.85.

I assumed these predictions were made right before December when all Market Outlooks came out.

When I look at the article, I read that Morgan’s prediction comes from Wilson, who has Bearish and expected “no change”. So the prediction must’ve been made close to when the index was at 2750.

[bhsince87]

And none of them were even close on the PE, which is 24.2 today.

[abracadabra11]

The mean estimated closing value was 3,056.25, which was still well below the actual closing value. So much for the wisdom of this crowd.

"It's difficult to make predictions, especially about the future."
- Danish proverb

I actually see this as reinforcing the idea of crowd wisdom. In aggregate, their mean prediction was within about 5% of the actual closing value. That's pretty good in my book.

[Triple digit golfer]

Side note, I just took a look at the final standings for the 2019 Bogleheads Contest, and except for four entries that were in the tens of thousands, every entry in the contest under-guessed the index's final number...

I see several guesses over the final number, many in the 3300s

[abuss368]

I could not guess it from one year ago with the Bogleheads contest.

Stay the course with a simple S&P 500 fund. Thank you Warren Buffett.

[oldcomputerguy]

Side note, I just took a look at the final standings for the 2019 Bogleheads Contest, and except for four entries that were in the tens of thousands, every entry in the contest under-guessed the index's final number...

I see several guesses over the final number, many in the 3300s

Sorry, I stand corrected.

[Triple digit golfer]

Side note, I just took a look at the final standings for the 2019 Bogleheads Contest, and except for four entries that were in the tens of thousands, every entry in the contest under-guessed the index's final number...

I see several guesses over the final number, many in the 3300s

Sorry, I stand corrected.

I see how you made the mistake, though. Looking through the list isn't intuitive because the list, rightfully so, is sorted by absolute value from the ending number, so the guesses are scattered about.

[willthrill81]

The mean estimated closing value was 3,056.25, which was still well below the actual closing value. So much for the wisdom of this crowd.

"It's difficult to make predictions, especially about the future."
- Danish proverb

I actually see this as reinforcing the idea of crowd wisdom. In aggregate, their mean prediction was within about 5% of the actual closing value. That's pretty good in my book.

Until you look at the average estimate from the Bogleheads contest, which was 2613.71 for 632 participants, and that included several guesses that were over 10,000. The experts came a lot closer than the average BH. Maybe the experts really do know more than the average bear, pun intended?

[abuss368]

Side note, I just took a look at the final standings for the 2019 Bogleheads Contest, and except for four entries that were in the tens of thousands, every entry in the contest under-guessed the index's final number...

I see several guesses over the final number, many in the 3300s

Sorry, I stand corrected.

What will 2020 bring?

[willthrill81]

Side note, I just took a look at the final standings for the 2019 Bogleheads Contest, and except for four entries that were in the tens of thousands, every entry in the contest under-guessed the index's final number...

I see several guesses over the final number, many in the 3300s

Sorry, I stand corrected.

What will 2020 bring?

Stocks will finish higher or lower than this year.

[abuss368]

I am going long on Total Stock and doubling down with SDS.

[Artsdoctor]

I actually did not realize that any respectable analyst would make a 1-year prediction! Aren’t these numbers known to be wildly off much of the time? Most analysts use 10-year periods to open the conversation.

[RJC]

Did Vanguard make any forecasts for 2019?

[1789]

The mean estimated closing value was 3,056.25, which was still well below the actual closing value. So much for the wisdom of this crowd.

"It's difficult to make predictions, especially about the future."
- Danish proverb

I actually see this as reinforcing the idea of crowd wisdom. In aggregate, their mean prediction was within about 5% of the actual closing value. That's pretty good in my book.

Until you look at the average estimate from the Bogleheads contest, which was 2613.71 for 632 participants, and that included several guesses that were over 10,000. The experts came a lot closer than the average BH. Maybe the experts really do know more than the average bear, pun intended?

Same thing i noticed. I think they have slight edge over average forum member

[abuss368]

Their crystal ball is no better than anyone else's.

[Trader Joe]

In December of 2018, Sam Dogen (the Financial Samurai) compiled the predictions of various 'experts' on where the S&P 500 would close at the end of 2019.



The actual closing price was 3,230.78.

The closest estimate was the second most bullish one, put forward by Keith Parker of UBS.

I put this forward only to show that seven of the eight estimates undershot the S&P 500's closing value for the year, four of them by more than 7%.

The mean estimated closing value was 3,056.25, which was still well below the actual closing value. So much for the wisdom of this crowd.

"It's difficult to make predictions, especially about the future."
- Danish proverb

Thank you very much for posting this information, Yes, of course. No one can predict the future. No one. This includes representatives from Vanguard, etc.

I always (and only) invest in broad U.S. Stock Market Index Funds (VFIAX or VTSAX).

I am very happy with my investment results.

[bck63]

And none of them were even close on the PE, which is 24.2 today.

Looking at this chart is a bit shocking:

https://www.multpl.com/s-p-500-pe-ratio

There have been very few times in history that the PE ratio has been this high. Surely that must tell us something? Or no? I don't know the answer to that question. I personally have taken some risk off the table.

[stocknoob4111]

now that all these experts have got 2019 wrong they have confidently started making predictions about 2020

PE ratios are high but interest rates are at historic lows as well.

[mortfree]

Some of those high numbers tens of thousands were for the Dow (confusion).

Sally would have nailed that contest.

I went real low (reverse psychology)

[Crushtheturtle]

What does Keith think now?

[Taylor Larimore]

Bogleheads:

Barry Barnitz's Financial Page has compiled interesting statistics from prior Boglehead Contests here:

Boglehead Contest Financial Page

Happy New Year!
Taylor

Jack Bogle's Words of Wisdom: "I don’t believe in market timing. I’ve been around this business darn near a half-century, and I know I can’t do it successfully."

[AlohaJoe]

And none of them were even close on the PE, which is 24.2 today.

Looking at this chart is a bit shocking:

https://www.multpl.com/s-p-500-pe-ratio

There have been very few times in history that the PE ratio has been this high. Surely that must tell us something?

It tells us that earnings are going to increase.

(Why can't that be the answer? Why is it always "price must go down"?)

[Crushtheturtle]

It could also mean "Hey look guys! I made a chart that falsely presumes reversion to some mean!"

[bhsince87]

And none of them were even close on the PE, which is 24.2 today.

Looking at this chart is a bit shocking:

https://www.multpl.com/s-p-500-pe-ratio

There have been very few times in history that the PE ratio has been this high. Surely that must tell us something?

It tells us that earnings are going to increase.

(Why can't that be the answer? Why is it always "price must go down"?)

That WAS the answer around 2009, when that chart was at an all time high. That was a wonderful time to invest in stocks.

[willthrill81]

Their crystal ball is no better than anyone else's.

Perhaps, but their average forecast was much closer to the truth than the average participant in the BH contest.

[abuss368]

In our evil stock picking days when we thought the S&P 500 was going down we speculated with SDS.

[Triple digit golfer]

In our evil stock picking days when we thought the S&P 500 was going down we speculated with SDS.

The thought of that makes me cringe. Thank God you saw the light!

[eye.surgeon]

In December of 2018, Sam Dogen (the Financial Samurai) compiled the predictions of various 'experts' on where the S&P 500 would close at the end of 2019.



The actual closing price was 3,230.78.

The closest estimate was the second most bullish one, put forward by Keith Parker of UBS.

I put this forward only to show that seven of the eight estimates undershot the S&P 500's closing value for the year, four of them by more than 7%.

The mean estimated closing value was 3,056.25, which was still well below the actual closing value. So much for the wisdom of this crowd.

"It's difficult to make predictions, especially about the future."
- Danish proverb

If there's any moral to this story it's that the groupthink idea that is pretty much accepted as gospel that future returns over the next decade will be a real 4% or less mean nothing. Even the most informed prognosticators have NO idea.

[willthrill81]

If there's any moral to this story it's that the groupthink idea that is pretty much accepted as gospel that future returns over the next decade will be a real 4% or less mean nothing. Even the most informed prognosticators have NO idea.

I'm inclined to agree. Dogen basically accused Jonathan Golub of smoking marijuana for coming up with such a 'high' forecast, but his was the second closest of the eight forecasts.

Even Bogle himself was fairly notorious for undershooting stocks' actual returns.

[abuss368]

In our evil stock picking days when we thought the S&P 500 was going down we speculated with SDS.

The thought of that makes me cringe. Thank God you saw the light!

Indeed. When I think back....

[Stinky]

In our evil stock picking days when we thought the S&P 500 was going down we speculated with SDS.

The thought of that makes me cringe. Thank God you saw the light!

Acronym check -

What is SDS?

[lazyday]

There have been very few times in history that the PE ratio has been this high. Surely that must tell us something? Or no? I don't know the answer to that question. I personally have taken some risk off the table.

It tells me to not put 100% of my money in the US.

Risk seems high, but I’m skeptical of the answer to cut back. I’m not certain it’s wrong to be fearful when others are greedy, and cut back when markets are expensive. But I don’t do it myself, and suspect that most people just hurt themselves with market timing.

Stay the course with a simple S&P 500 fund. Thank you Warren Buffett.

John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

Elon is much smarter than me, maybe I should put 100% of my money in Tesla?

It’s a bad idea to go 100% Tesla, or 100% Tech sector, or 100% US.

Bogleheads diversify.

[lazyday]

Why do people bother with weather forecasts 10 days in the future, when they are so often wrong?

Do forecasters have “NO idea” of the weather in exactly 10 days from now? Or is it impossible to make a reliable forecast, and our prediction is just the best we can do?

Some forecasts are better than a random guess, but still often wrong.

If $1 invested in stocks gets you $0.03 in cyclically adjusted earnings, then we should probably predict lower returns than we would if stocks earned $0.07 per dollar.

Looking at 1 year predictions is something of a straw man. Of course the results are likely to be terrible, just like a 30 day weather forecast. If you want merely bad results instead of terrible, then look at 10 year predictions. I like the predictions from Research Affiliates and from AQR, because they give detailed methodology that makes some sense to me. Or you can just use future returns = current 1/CAPE, nice and easy. Though I’m not sure if it’s appropriate to compare 1/CAPE from EM to US or developed ex-US.

[Triple digit golfer]

In our evil stock picking days when we thought the S&P 500 was going down we speculated with SDS.

The thought of that makes me cringe. Thank God you saw the light!

Acronym check -

What is SDS?

I had to Google it. Some ETF that is supposed to double the opposite return of the S&P 500 index. If 500 declines 2%, it should increase 4%. Something to that effect.

No thank you!

[z3r0c00l]

Stocks will finish higher or lower than this year.

A bold prediction given the third option!

[abuss368]

In our evil stock picking days when we thought the S&P 500 was going down we speculated with SDS.

The thought of that makes me cringe. Thank God you saw the light!

Acronym check -

What is SDS?

I had to Google it. Some ETF that is supposed to double the opposite return of the S&P 500 index. If 500 declines 2%, it should increase 4%. Something to that effect.

No thank you!

Correct. An inverse on steroids essentially.

[Stinky]

In our evil stock picking days when we thought the S&P 500 was going down we speculated with SDS.

The thought of that makes me cringe. Thank God you saw the light!

Acronym check -

What is SDS?

I had to Google it. Some ETF that is supposed to double the opposite return of the S&P 500 index. If 500 declines 2%, it should increase 4%. Something to that effect.

No thank you!

Correct. An inverse on steroids essentially.

This sounds like something the “old Stinky”’might have considered if he was “convinced” that the market was going to fall.

“Old Stinky” lived in the days BB. (That is, before Bogleheads)

[Helo80]

Yup --- Seeing lots of stuff happen that many said should not or would not happen. I remember reading a late-night editorial from Nobel Prize winning Economist Paul Krugman from the New York Times about the economic despair that we should be in now.... has not happened. The last 3 years of the market have been spectacular.

[Triple digit golfer]

Yup --- Seeing lots of stuff happen that many said should not or would not happen. I remember reading a late-night editorial from Nobel Prize winning Economist Paul Krugman from the New York Times about the economic despair that we should be in now.... has not happened. The last 3 years of the market have been spectacular.

So NOW is the time to sell stocks and wait for the crash?

[abuss368]

The thought of that makes me cringe. Thank God you saw the light!

Acronym check -

What is SDS?

I had to Google it. Some ETF that is supposed to double the opposite return of the S&P 500 index. If 500 declines 2%, it should increase 4%. Something to that effect.

No thank you!

Correct. An inverse on steroids essentially.

This sounds like something the “old Stinky”’might have considered if he was “convinced” that the market was going to fall.

“Old Stinky” lived in the days BB. (That is, before Bogleheads)

Yeah they were crazy stock picking days for sure!

[willthrill81]

Yup --- Seeing lots of stuff happen that many said should not or would not happen. I remember reading a late-night editorial from Nobel Prize winning Economist Paul Krugman from the New York Times about the economic despair that we should be in now.... has not happened. The last 3 years of the market have been spectacular.

So NOW is the time to sell stocks and wait for the crash?

A broken clock is right twice a day (unless it's digital).

[MotoTrojan]

Why do people bother with weather forecasts 10 days in the future, when they are so often wrong?

Do forecasters have “NO idea” of the weather in exactly 10 days from now? Or is it impossible to make a reliable forecast, and our prediction is just the best we can do?

Some forecasts are better than a random guess, but still often wrong.

If $1 invested in stocks gets you $0.03 in cyclically adjusted earnings, then we should probably predict lower returns than we would if stocks earned $0.07 per dollar.

Looking at 1 year predictions is something of a straw man. Of course the results are likely to be terrible, just like a 30 day weather forecast. If you want merely bad results instead of terrible, then look at 10 year predictions. I like the predictions from Research Affiliates and from AQR, because they give detailed methodology that makes some sense to me. Or you can just use future returns = current 1/CAPE, nice and easy. Though I’m not sure if it’s appropriate to compare 1/CAPE from EM to US or developed ex-US.

I want to trust the Research Affiliates data; they show a significant expected outperformance on several fundamental indices I hold. Hmm, who developed those indices again...?

[Helo80]

So NOW is the time to sell stocks and wait for the crash?

I'm still waiting for this crash and trade war to happen. I am waiting for this prolonged recession. /s

If you need the money for a car/house/trip soon --- sell. If you don't, keep it in VTSAX or VFIAX. I'm 100% equities, and I won't change that anytime soon. JL Collins philosophy/blog roughly matches my thoughts and humor.

Though, like you, I can enjoy a fine 3-digit golf game as well!

[mighty72]

looking at https://www.bogleheads.org/blog/boglehead-contest-2/, my guess about the guesses is that next this year forecasts will be too high