Annual Stock Market Predictions

Many stock market predictions are made and publicized each year, yet these predictions are more art than science. Financial experts, analysts, and media outlets frequently offer forecasts based on trends, historical data, and economic indicators. However, these predictions are often wrong, as the market is influenced by countless unpredictable factors like geopolitical events, consumer behavior, and unexpected global crises.

The S&P 500 has performed well year-to-date, starting the year at 4,742.93 and now at 5,872.16 as of December 18th, returning 24.77%. So how does that compare to the experts' predictions for the year? Take a look below at some prominent forecasts made for 2024, at the end of last year as of December 18, 2023:

JP Morgan                           4,200

Morgan Stanley                4,500

Wells Fargo                       4,625

Barclays                              4,800

UBS                                       4,850

Bank of America              5,000

As you can see from the forecasts above, the year has been much better than predicted by many major companies (though 2024 isn’t over yet), which may lead you to ask how useful this information really is. I often say that information is your friend, yet it’s important to determine what information is useful and relevant, and what can be taken from it. I believe there is better information available to investors to provide guidance for a successful investment strategy, which doesn’t rely on annual forecasts.

Taking a broader view, the average annual return for the S&P 500 over the last 50 years, 1974 - 2023 is 12.66%. The market was positive in 40 of those 50 years and the average gain in those positive years was 19.43%, while the average return in down years was -14.42%. The best year was 1995, up 37.58%, and the worst year was 2008, down 37%. It is impossible to predict from year to year if returns will be positive or negative, and many positive years have significant drawdowns at some point during that year. Also, you shouldn’t expect that your returns from year to year will be around the average annual return. Therefore, having a consistent approach and a longer-term view, while owning different asset classes to diversify your portfolio based on your financial goals, is a good starting point to build a successful investment strategy.

While predictions are intended to provide guidance, they often fail to capture the full range of unpredictable events that shape market performance. Going into 2025, as in any year, investors are reminded to be consistent, diversified, and prepared for the unexpected.