Definitive Stock Predictions for 2016!

Definitive Stock Predictions for 2016!

Happy New Year! Now that the dust has settled on 2015, it’s time to enjoy the flood of predictions coming from well-known (and not so well-known) experts on stock market performance for 2016.  I did a quick scan and came up with the following:

  • Julian Emanuel, a strategist at UBS, expects the S&P 500 to end 2016 at 2275 amid modest earnings growth and rising interest rates, according to Forbes. That translates to about an 11% return for the year.
  • In a research note, Goldman Sachs’ top strategists predict that the S&P 500 will go nowhere in the coming year, ending 2016 at 2100. Including dividends, that’s only about a 3% total return.
  • Georg Vrba, creator of the iMarketSignals Business Cycle Index (BCI), sees no recession on the horizon. The BCI index has (according to Vrba) successfully predicted the past seven recessions going back to 1967, providing advance notice of 11 weeks on average. His methodology is not coming up with any new sell signals at this time.
  • Adam Hayes at Investopedia believes that economic data is showing a very similar pattern to the one right before the last recession (retail sales and factory orders dropping, U.S. export growth weakening, corporate profits declining). Although he doesn’t address stock prices specifically, his analysis would imply negative returns for the year.
  • Credit Suisse’s Andrew Garthwaite believes we are at the later stages of the equity bull market. Despite increasing headwinds for equities related to valuations and weak earnings, he is predicting 6.8% growth in U.S. equities in 2016, with an end-of-year S&P 500 target of 2225.
  • Not to be outdone, Paul Farrell, the Marketwatch behavioral economics columnist, pours on the hyperbole with, “It’s time to start the countdown to the crash of 2016. No, this is not a prediction of a minor correction. Plan on a 50% crash.”   He predicts the Dow will drop to about 9000. (Lest you question the authority behind such a melodramatic statement, Marketwatch informs us that he’s the author of nine books and was an investment banker with Morgan Stanley.)

Even if we grant some leeway to the above numbers, at least half of them by definition are going to turn out to be flat out wrong. I am reminded of the quote attributed to John Kenneth Galbraith: “There are those who don’t know and those who don’t know they don’t know.”

Now here are my predictions:

  • All the so-called investment experts will continue to be right less than 50% of the time (as documented by Dan Gardner in Future Babble).
  • Those experts whose predictions do turn out to be wrong at the end of 2016 will still churn out more predictions for 2017 nevertheless.

Which of the above eight predictions would you put your money on?

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