Sound Advice: December 28, 2022

Sound Advice: January 3, 2025

2025 Market Forecasts: Stupidity Taken To An Extreme If you know anything about stock market performance, you can only gag at the nonsense “esteemed forecasters” are now putting forth about the prospective path of stocks in the year ahead. Our cousins in the UK would call this rubbish. I would not be as kind. Leading the Ship of Fools is the forecast from the Chief Investment Strategist at Oppenheimer who is looking for a year-end 2025 level for the Standard & Poor’s Index of 7,100, a whopping 21% increase from the most recent standing. Indeed, most of these folks are looking for double-digit gains. Only two expect stocks to weaken. In the last 30 years, the market has risen by more than 20% only 15 times. The exceptional span during that time was 1996-1999, which accounted for four of those jumps. What followed in 2000 through 2002 was the polar opposite: 2000: -9.1% 2001: -11.9% ...

Sound Advice: January 15, 2025

Why investors shouldn't pay attention to Wall Street forecasts Investors shouldn't pay attention to Wall Street forecasts for several compelling reasons: Poor accuracy Wall Street forecasts have a terrible track record of accuracy. Studies show that their predictions are often no better than random chance, with accuracy rates as low as 47% Some prominent analysts even perform worse, with accuracy ratings as low as 35% Consistent overestimation Analysts consistently overestimate earnings growth, predicting 10-12% annual growth when the reality is closer to 6%. This overoptimism can lead investors to make overly aggressive bets in the market. Inability to predict unpredictable events The stock market is influenced by numerous unpredictable factors, including geopolitical events, technological changes, and company-specific news. Anal...

Sound Advice: October 12, 2022

More Pain Ahead? It’s been a difficult year for the investment markets, but tough times have happened before and they will certainly happen again. Sometimes recoveries are relatively quick and sometimes a hefty dose of patience is required. No two downdrafts are alike, but the net result is always a rebound to even higher levels than seen before. One of the most uncomfortable stretches over the last half century took place during the oil embargo days of the early and mid-1970s. Market valuations fell to the high single digits, a level that was about half the historic average. For investors, this was one of the great sales of all time. Those who had the courage to get aboard reaped huge rewards. More recent pullbacks of note took place during the dot.com days of the turn of the millennium and the banking crisis of 2008-9. The former period was marked by what appeared to be investors’ absolute indifference to longstanding measures of reasona...

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