In the case of bold predictions, like many of you I suspect, I have gotten caught watching the financial news when some well-dressed, smart looking person tells the host why the market is in danger and about to crash. And despite knowing better, I must fight the temptation to get agitated because the person is on TV and probably has a Harvard or Wharton MBA and looks way smarter than me so must have some type of insight I don’t have. But I have found that it is a phenomenon in the financial press that if a stock analyst or economist pounds them with a bold prediction and the prediction is correct, a star can be born, a self-named firm can be founded, and riches can be created. Regardless of whether the predictor is ever right again. A quick walk-through history before getting to the predictions for 2024 confirms this.
Elaine Garzarelli was a stock analyst at Shearson Lehman in the 1980’s and made a career out of being right in a big way one time. She predicted the 1987 stock market crash a few weeks before it happened. This one prediction catapulted her to financial stardom although she was rarely correct again including immediately after her famous prediction. She attracted a fair amount of money to a stock fund she managed that underperformed the market badly for the next three years after she predicted the 1987 crash. In July 1996 Elaine tried again in a big way by making a prediction that the stock market would crash 15% to 25% in the following few days. That prediction turned out to be dead wrong as the market returned 6.3% in the month following her crash call and was up 27% in the six months following her call.1
You can list on only two hands the very few people who accurately predicted the economic and stock market crash in 2008 including those whose job it is to forecast and make predictions. Most did not come close and after the fact there seemed to be far more news articles written on the soul searching as to why everyone missed the economic calamity than there were forecasters that got it right. Two prominent people who did call the 2008 crash correctly were Meredith Whitney, a Managing Director researching the banking sector at Oppenheimer, and Nouriel Roubini, a professor of economics at NYU. The prediction catapulted Meredith Whitney to stardom and she left Oppenheimer and launched her own research firm. Three years later she was taken to task for wrongly predicting a similar disaster in municipal bonds that never materialized.
Nouriel Roubini went from relative obscurity to financial stardom for accurately calling the 2008 crisis. I think one quote from Roubini and one quote about Roubini perfectly sum up the phenomenon I have been describing–the upside for getting a bold call correct far outweighing the downside for being wrong most other times. In a 2018 interview, Roubini seems to delight in the fame from his 2008 call. He said, “every day, someone on the street stops and says, ‘Can I take a picture with you.’2 However, Tony Robbins thought the opposite and had a funny quote about him: “Roubini warned of a recession in 2004 (wrongly), 2005 (wrongly), 2006 (wrongly), and 2007 (wrongly)” … and he “predicted (wrongly) that there’d be a ‘significant stock market correction in 2013.”3 Ultimately, Roubini is famous for getting right a call once and then was boldly wrong over and over again.
With that as background, let’s see how the prognosticators did as they headed into 2024. If we go back a year prior to the end of 2022 to lay the groundwork for the predictions, the economy and the markets were coming off a bad year in 2022 because of inflation, Fed rate increases and awful stock and bond markets. Nearly 100% of economists were predicting a recession and that the tough stock market would continue in 2023. The recession never materialized and the S&P 500 returned performance in the high teens in 2023 finishing the year at 4769. As we approached 2024 and coming off [another] year in 2023 of mostly wrong predictions, most of the predictors were careful to add some upside to their predictions.
The financial newspaper Barrons has an annual roundtable of eight smart people in our business that make predictions for the upcoming year. The predictions for 2024 were for the stock market to be in a fairly tight range with modest losses to modest returns that ranged from -5% to +5% for the year.4
Similarly, the New York Times published the stock market predictions for the major Wall St. banks:
And how did the predictors do? As stated above the S&P 500 Index finished 2023 at 4769 and currently sits at 6050 in late 2024 as I write this article. Half of the investment banks above predicted the S&P would be down in 2024—nearly a 30% miss. And the three banks above that predicted the best return for the S&P missed by nearly 20%.
One of the winners of the most outlandish predictions was the following headline I found:
“Renowned Investor Who Predicted 1987 Stock Market Crash Warns of Major Sell-Off With 30% Correction: ‘This is The Thinnest Market I’ve Ever Seen…” dated January 31, 2024. Robert Prechter made the prediction and missed by literally 55%.5
The upside from being right dramatically even once in a career far outweighs any downside from missing an outlandish prediction. And in the case of Robert Prechter in 2024, Meredith Whitney in 2011, Nouriel Roubini seemingly every year and Elaine Garzarelli in 1996, the desire to relive that glory appears to be strong.
And of course, Jim Cramer of CNBC can be good for a laugh with his two predictions from early 2024:
“According to my crystal ball, people will take profits in the best of the best, the ones that have defined this market, yes, the Magnificent Seven and friends, as well as the richly valued software enterprise names,” Cramer said. “I think investors will use that cash to invest in companies that haven’t gotten any respect for ages.” He advised waiting patiently for the sell-off and then do some buying.6
Dead wrong, Jim, on both counts. If you followed Jim’s advice you missed much of the return of an S&P 500 index that has returned more than 25% year to date. The “Magnificent Seven” as they were termed in 2023, Apple, Meta, Microsoft, Nvidia, Tesla, Amazon and Google were responsible for 60% of the S&P 500 index return in 2023 and were again responsible for about half of the market return in 2024. Once again, not much consequence for Jim Cramer being wrong with startling frequency as last I checked he is still on TV.
The point of my reflection is not to cast aspersions on the other smart folks in this business. All right, the point of my reflection is not to cast too many aspersions on our competitors. Knowing and predicting what will happen in the short term is like timing the market, nearly impossible. Even the smartest investors have a hard time getting it right except with a lot of luck and maybe once in a big way over an entire career. In fact, equally smart people are often found predicting exactly the opposite thing on the same day on the same financial channel. What is important and a drum that we keep banging is to not get too wrapped up in what is happening in the short term and never to try to time the market. Rather, the focus should be on long-term objectives and investing to meet those long-term objectives. I am not at all saying that client objectives do not change, and asset allocation should not change with changing objectives. I am simply saying focus on the longer-term because even the smartest, most experienced investors have a hard time getting it exactly right in the near term.
My final important reflection will be on the retirement of Mary Lisa Sisson from Howe & Rusling at the end of 2024. No one is completely irreplaceable, and the firm will prove that to our clients with the outstanding people we have taking over Mary Lisa Sisson’s clients. But I will say that Mary Lisa comes the closest to being irreplaceable. No one worked harder from the time she got to work until she went home than Mary Lisa and then extended that effort by being available seemingly 24 hours per day. I feel extremely lucky that Mary Lisa and I could buy Howe & Rusling together with another good friend Casey Ryan. Mary Lisa was a big part of the reason we were fortunate to grow the firm’s Assets Under Management from $550 million or so in 2006 when we bought the firm to $2 billion as of the end of November 2024. I will miss her; all her co-workers and clients will miss her, and we wish her the very best in retirement. Godspeed, Mary Lisa.
Disclosures: This commentary may include forward-looking statements about the markets or specific financial outcomes. These statements are inherently speculative and involve risks and uncertainties that could cause actual results to differ materially from those projected. Past performance is not indicative of future results. Certain information and historical data referenced in this commentary are derived from third-party sources. While believed to be accurate, this information has not been independently verified and is not guaranteed as to its accuracy or completeness. The examples of market predictions and historical commentary provided are for illustrative purposes only. They do not constitute investment advice or a recommendation to engage in any specific investment strategy. This piece highlights the difficulty of predicting short-term market movements. Investors should be aware that attempting to time the market can lead to suboptimal investment outcomes. All investment decisions should align with individual goals, risk tolerance, and time horizon. Mentions of individuals, firms, or specific predictions in this commentary do not imply endorsement or approval. These references are used solely for educational or illustrative purposes. The performance and predictions of individuals and firms discussed relate to specific historical events. They do not reflect current market views or capabilities and may not apply to future market conditions. This material is not intended to serve as the primary basis for any investment decision, nor is it intended to provide specific recommendations or advice for any individual or entity. Please consult a financial professional for personalized advice. The S&P 500 Index is used as a benchmark for general market performance. Direct investment in an index is not possible. Index performance does not reflect the deduction of fees or expenses. Investing involves risks, including the potential loss of principal. Diversification does not ensure a profit or protect against a loss in a declining market.
- Benzinga.com, This Day in Market History: Elaine Garzarelli’s Infamous Bear Call July 23, 2020 ↩︎
- WSJ, “Dr. Doom Still Basking In His Fame After Warning of housing Collapse by Amrith Ramkumar April 13, 2018 ↩︎
- Wikipedia, Nouriel Roubini ↩︎
- Barron’s Magazine “The Market’s Gains Won’t Come Easy From Here, Barron’s Roundtable Pros Say” By Lauren R. Rublin Updated January 14, 2024 ↩︎
- From Renowned Investor Who Predicted 1987 Stock Market Crash Warns of Major Sell-Off With 30% Correction: ‘This is the Thinnest Market I’ve Ever Seen….” By Bezinga Edited by Pooja Rajkumari ↩︎
- From CNBC online: Cramer makes market predictions for 2024, says investors may be rolling out of Tech, by Julie Coleman January 2, 2024 ↩︎
