Just before the beginning of every year, 10 top Wall Street investment strategists are asked by Barron’s, the century-old financial magazine, to predict which industry sectors will outperform and underperform the Standard & Poor’s 500 stock index for the year ahead.
Fritz Meyer, an independent economist, whose content is licensed by this firm, has tracked the results of Wall Street’s predictions in Barron’s every year since 2007, based on the Barron’s survey of Wall Street’s top strategists. The accompanying infographics show Wall Street’s inconsistent results for the 12 months ended Dec. 31, 2020.
In Dec. 2019, nine of the 10 strategists said financials would outperform. Sounds like a sure thing? Nope! Financial stocks lost 4% in 2020. That’s a major miss, considering the S&P 500 – which is comprised of the 10 industry sectors, shot up by 16.3% in 2020.
Similarly, stocks benefiting from increased discretionary spending by consumers were picked to outperform the S&P 500 by three strategists, while four predicted they would underperform. Although consumer discretionary was panned by more strategists than those who favored it, it was the second-best performing sector of 2020, with a spectacular 32.1% gain.
Technology stocks, a perpetual favorite with Wall Street, were a good pick for 2020, as was health care. However, another favored sector, energy, lost a stinging -37.3% in 2020. (Let us know if you would like a special report about the "math of losses"-how much it takes in future gains to offset prior losses.)
Based on the data compiled annually since 2007 by Fritz Meyer (an independent economist widely praised by independent financial professionals for many years), Wall Street’s best minds are shown to be chronically inconsistent in predicting which industry stock sectors will be the best or worst performing during a particular calendar year.
An important investment idea to remember in 2021 is this: Strategic investing is not preoccupied with predicting what happens tomorrow or in the next 12 months.
Wall Street pundit’s predictions make great magazine covers but have nothing to do with investing strategically over the long run.
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