Every year, about this time, the investment firms trot out their annual forecasts for the coming year, and while this is the most wonderful time of the year, these projections really grind my gears. As someone famous said—or someone not famous made up—“predictions are difficult, especially about the future.” 

The New York Times recently published the story, “Want to Know Where the Market Is Going? Don’t Trust This, or Any, Forecast.” It’s behind a paywall, but if you have a subscription, you can access it here. It has some great takeaways, and I have used an AI tool to summarize those for me and which I have edited. 

Wall Street forecasts are worthless: Since December 31, 2000, Wall Street analysts have predicted gains every year, but the market fell in 7 of 25 years (28% of the time). The 2022 forecast illustrates this perfectly—strategists predicted a 3.9% gain, but the S&P 500 fell 19.4%, a miss of 23.3 percentage points. The 2008 crash saw a 38.5% decline that forecasters failed to predict. Average forecast error: 14.1 percentage points annually—more than 50% larger than the forecast itself.

Misleading averages: While the average annual forecast of 8.9% price gains seems close to the actual 7.7% annual performance, this masks terrible accuracy. The forecasters were positive in all down years and consistently underestimated the good years, making their predictions essentially useless.

Why forecasters are always bullish: Negative predictions hurt business. If brokers told clients the market would decline, people wouldn’t trade stocks and bonds. The firms make elaborate and compelling presentations that create an illusion of clairvoyance.

The author’s forecast: The author of the article, Jeff Sommer, who writes on markets and the economy, for fun, predicts a 16% decline in 2026 but with “no pretense of accuracy whatsoever.” Not a single strategist is predicting a decline in 2026.

Reasons for both optimism and pessimism: The article notes legitimate concerns including tariffs, high share valuations, and AI euphoria. But there are also positive factors like market momentum and strong corporate earnings. The point: no one knows which will dominate.

Historical precedent from famous forecasters: Byron Wien and Laszlo Birinyi, both prominent strategists who died in 2023, completely missed the 2008 crash. When questioned, Wien admitted he had no ability to foresee the future—he just wanted to be “interesting.” Birinyi said his predictions were merely “arguments” for people to evaluate themselves, not actual forecasts.

Here is the author’s advice: 

  • Ignore all forecasts completely, but invest anyway for the long term 
  • Use low-cost, well-diversified index funds 
  • Hold appropriate high-quality bonds for safety 
  • The economy typically grows over the long run, rewarding patient investors in profitable companies 
  • If retired or with a short time horizon, emphasize bonds and drastically reduce or eliminate stock exposure 

Bottom line: The author compares Wall Street forecasts to his tennis serve—sometimes too long, sometimes too short, technically “perfect on average” but actually terrible. Market predictions are theater designed to generate trading activity, not useful investment guidance.