Education

What to Expect From the Market This Decade

We’ve never understood the propensity of many Wall Street media “stars” to make prognostications regarding the stock market’s future. Mostly, their predictions are for “lower than average” returns for the next decade. This year has been no exception, and these stories abound. Low expectations seem to be in vogue, even as the country (and the world in general) is experiencing an upturn in attitude and expectations.
We wonder why the naysayers feel so confident, when the future is predicated on unpredictable future events. First, many of the media “talking heads” are self-appointed “experts,” not willing to own up to track records for their prior prognosticating having been flimsy and inconsistent. There is nothing so powerful among the media crowd than the knowledge that they will not be held accountable for being wrong.
One of my favorite pieces of wisdom is simple, but too often overlooked– always consider the source. What are Wall Street purveyors of “wisdom” selling? All are selling something, whether more media time and access for themselves, expensive newsletters, precious metals, books, or whatever. How trusting could anyone be after discovering the actual motive behind the prediction?
Yet another talking point for the “anointed ones” regards pure market statistics. Classic among them is the Market Correction, which refers to a drop of at least 10% in the S&P500 Index from its most recent peak. Corrections occur on average once per year. That does not mean there will be a Market Correction every year, or even soon. That is a misuse of statistics.
Similarly, many look at our market gains of the prior two+ years, citing the past 834 calendar days, during which the S&P500 Index gained over 71%, insinuating that this can’t go further. That is also a false conclusion, as the average Bull Market runs over 1,000 days, with total gains of more than 114%. That sure doesn’t sound like a restrained Bull Market.
No one knows what the market will do this year, no matter how confident he or she appears. I am certainly no exception. That said, our new Administration has a track record of success. To me, that counts. Good, bad, or indifferent, recent changes do nothing to sour my optimism. Were I to be asked for a market forecast, I would simply tell the questioner that over a long time period, average annual market returns are near 11%. We have to say, because it is so true, that past performance is no guarantee of future success. With a record like that, I’ll stick with a diversified fundamental investing strategy, including a lengthy time horizon. It works.
Let’s all relax and enjoy the newfound spirit of optimism. We will continue to report the actual results weekly.
