Prediction Season
The start of a new year is a great time to reflect on the past, set goals for the future, and tune out predictions from the financial industry.
The S&P 500 Index rose by 23.3% in 2024. This far exceeded expectations from analysts polled at the end of 2023, none of whom believed the S&P would grow by its historical average rate of return, 12.3%. Nearly half of the analysts predicted a negative year for the index. Hopefully, those analysts didn’t eat their own cooking and divest from the stocks during such a strong year.
The dispersion in predictions for 2024 highlights the challenge of making asset allocation decisions based on forecasts. Individuals arrive at different expectations because they may see the world differently. The market aggregates these disparate viewpoints, offering a wisdom of the crowd that’s very difficult to beat.