The real lesson from failed forecasts

Originally posted on Vanguard Blog:

Every year about this time, I bask in the warm glow of schadenfreude as I read stories such as the Wall Street Journal’s “Why market forecasts are so bad.” (Subscription required.)

“On average, the analysts thought the S&P 500 would rise 8.2% in 2013,” writes reporter Joe Light. “The S&P 500 has actually risen 27.5% this year through Friday, not including dividends—a difference of 19.3 percentage points.” (The Journal article was published on December 20, 2013. By year-end, the index had produced a 12-month return of 32.4%, including dividends.)

How can highly trained experts with vast research resources at their disposal be so … wrong?

Although I chuckle at the forecasters’ foibles, it’s not really the forecasters who are wrong. It’s the belief that a one-year stock market forecast, whether from Warren Buffett or the proverbial shoeshine boy, can convey useful information.

My 2014 outlook

A good…

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George M. Fattell.

The gmf journal is a general subject blog that reflects my thoughts and opinions on a variety of topics that are of interest to me. Current home base is the Lehigh Valley, Pennsylvania, USA.

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