Gallery:Step 4|Step 4: Time Pickers

A Retrospective on 2013 Predictions

Gallery:Step 4|Step 4: Time Pickers

“Prediction is very difficult, especially if it’s about the future.”

-Niels Bohr

 

“Stocks are about to plunge, Wells Fargo warns.” According to strategist Gina Martin Adams, the S&P 500 should now be at 1,440, which would be a 16% drop from when she made the prediction on 9/20/13. Unfortunately for her and fortunately for us, it is at 1,841 as of the close on 12/27/13, which equates to a gain of about 8%.

You don’t have to be a genius to realize that when two people make opposite predictions, one of them is likely to be right, and that is what we saw with Ryan Detrick’s prediction of a market rally in the fourth quarter of 2013. While we are not sure exactly what qualifies as a rally, 8% in a three-month period is good enough for us.

Another prediction that was on-target was Professor Jeremy Siegel’s April 2nd call for the Dow to surpass 16,000 by year-end. Of course, we have plenty that were disastrously wrong such as David Stockman’s warning us, “There are bubbles all over—hide in cash” and Steve Hochberg telling us how wrong we were for investing in this market.

In light of the mixed record of market predictors, we have to ask how did the stock-pickers do? One article from the end of 2012 that we flagged was CNNMoney’s 15 Top Stock Picks from Star Investors. Since each well-known active manager gave his or her top pick for 2013, you may think that a portfolio composed of these stocks would be grand slam. Well you would be wrong. The average return of these 15 stocks (32.5%) was virtually identical to what you would have received from an investment in the Vanguard Total Stock Market Index Fund (32.2%). Kiplinger’s 23 Stock Picks for 2013 came in a little better at 35.2%, but considering the additional risk of individual stocks vs. indexes, that is nothing to write home about. The same goes for Jim Jubak’s 10 Top Stocks for 2013 which averaged 34.1%.

Naturally, there is no shortage of predictions for 2014. IFA’s best advice is to ignore all of them.