The Folly of Market Predictions

Since 1926, the overall stock market, as measured by the S&P 500, has returned over 12% on average, but as we all know, the actual annual returns have varied widely. When we examine the calendar year returns over this time span, there haven’t been many years where the returns fell between 11.5% and 12.5%.  In fact, only four years (of the 99) had annual performance around 12% Over this same time, the S&P 500 had returns greater than 30% in 20 different calendar years and returned less than -20% six times.

It is often the case that people will have their own predictions of market performance, but we believe this practice doesn’t add much value to investors. For example, in a recent article titled “Prediction Season” published by Dimensional Fund Advisors featured analyst predictions at the end of 2023 for market performance in 2024.

1. Price-only return.

2. Based on actual S&P 500 Index average annual total return from 1927 to 2024.

In USD. Source: Bloomberg, using the “Strategists S&P 500 Index Estimates for Year-End 2024” as of December 19, 2023. Analyst forecasts and 2024 return are price returns. S&P data © 2025 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.

As can be seen in the chart, even the experts from high-profile financial firms were not even close in their predictions. We must keep in mind that the performance of the market is unpredictable in any given year. We are often asked to predict where we think the markets will be at the end of the year, but we don’t believe there is an accurate way to forecast in such a short period of time. However, we continue to believe that over the long-term, investors will be compensated for taking market risk.