The Track Record of Market Pundits
Posted: Farrah Gandhi
If you have spent any time watching the market pundits on CNBC, you likely came away from it either very excited, or very worried. Often these shows or publications will feature very intelligent people with prestigious backgrounds and track records making some sort of bold prediction for why (fill in the blank) will happen this year. It is easy to think, “if this hedge fund manager/economist/politician believes the economy is going to do X, who am I to disagree?” The problem is that the economy/market is extremely complex, and accurately forecasting what will happen in the next year consistently is impossible. Think about trying to predict the weather. The smartest meteorologists in the world are all trying to make the best forecasting models, but if they try to predict much further out than a week, their success rate plummets. The result is not much different for predicting markets.
In the article below, Larry Swedroe, a renowned researcher, decides someone should actually check to see how often the forecasters get it right. For each year since 2010, he picks a handful of “sure things” that pundits believe must happen each year, and checks at the end to see if they came true. This article takes a look at those “sure things” in 2017…