The Business Week forecasts are out, and — whattayaknow — I am not the low forecast this year!
This year, the online version did something very interesting: The entire list of 80 pundits is now built into a relational database, readily sortable by every category.
Its way cool — all of the forecasts are sortable, by mid- and year end- forecast, asset allocation, index, etc. (Suggestion: Could we see this on one long page, instead of 4?) It a much better way to present the information than a plain static page. (Hey, this interactivity thing is fun!)
Speaking of forecasting: As I discussed Tuesday, I was surprised at seriously people take these things. (I put little weight on forecasts). For the specifics as to why predictions are meaningless, I suggest you read The Folly of Forecasting.
Regardless, my thoughts on this were simple: The pre-correction rally we discussed last year for 2006 — Dow 11,800, SPX 1,350, and Nasdaq 2620 –came to pass — but not the correction itself. With the economy slowing, and coprorate profits at a record cyclical high, a revenue/profit slowdown remains a real possibility. (I would go so far as to say an increasing probability).
So the mid-year correction is built into my forecasts — making me the 2nd lowest mid-year forecast, but the middle of the lower third for year’s end.
click for larger table
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Somehow, this is seen as a capitualtion, thanks to our friend and neighbor, selective perception.
Anyway, go play with the table — its pretty cool.
i´m surprised that you still think that the us markets will close green for 07.
as a contrarian i like this….
when i read the “2007 outlook from pimco” there is not much upside left.
PIMCO’s forecast of a U.S. soft landing includes the expectation of a moderate slowdown in consumer spending next year, with the negative ongoing impact from the housing market partially offset by wage growth and the boost to real incomes from lower energy prices. But there is a great degree of uncertainty in the outlook…….
Hey Barry, I could be reading that thing wrong, but if I were an investor, I’m not sure I’d like your asset allocation. Equities 50% US-20% international, bonds 20%, cash 5%. Where’s the rest of me? Is that your fee? Preston Sturges videos, Aston Martins, the newest Decemberist cd?
JMF, if we get deeply oversold (and I think Dow 10k or worse will generate that) you get a nice bounce. Look at the 5 sell offs and snapbacks over the 1966-82 period as an example.
Scott, the remaining 5% is “Other” — commodities, VC investments, real estate , etc.
Mr. Ritholtz, I thought you didn’t think that forecasts mattered, yet here you are offering yet another one! You are a glutton for cyber-punishment ;-)
I guess us bears will have to soldier on without you. Whew, at least Nouriel Roubini is still on board.
When I first was approached to do the Business Week forecasts, I offered up an idea: Why not do some counterprogramming, look at the long term track record of the forecasters, and explain why this is not very serious. I actually wrote the “Folly of Forecast” in anticipation of that in 2004 version.
The response was: Its a double issue, it sells a lot of advertising, and we all know its only good fun, etc. “Do you want to participate or not?”
Sure, ok. My bosses at the time would have been annoyed if I passed — that first year so I picked Energy as my favorite sector, and until the 3 days before the contest ended, I was the top dog.
Now, my partners would be disappointed if I didn’t.
I assume most people who participate do it for the name recognition and marketing value and legitimacy/credibility. And someone “wins” each year, and that generates some more good marketing materials.
Glutton for punsihment? Really more of a professional obligation — but your point is well taken . . .
Barry, only 5% in other? I’ve seen many analysts raise their standard 8-10% “suggested precious metals holdings” to 15-20% now. I very much like Todd’s outlook on Minyanville – http://www.minyanville.com/articles/index.php?a=11814
He says that metals will outperform Tech – based on what many are saying that’s quite bullish.
Looks like most forcast the 10 year treasury to drop interest rates(which implies the FED wil drop) which should make the market rally.
its interesting that while everyone seems to be saying different, everyone is primarily saying the same. One thing will definitely happen in 2007:
Volatility. Chances are that we may see a raising and a lowering of rates, a Dow well above and well below the 12,500 mark and major shifts in currencies, derivatives and commodities.
Bear in mind that even Roubini – who sees a serious recession in 07 – sees a stronger economy going into 2008. The bull market in commodities would then be fully ripe to for its long ride.
imho forcasts are not worth much. what matters is how much money a forcaster has made trading or investing in those ideas. any chance you would share how you have done this year?
yes, there is a chance
Been there, done that. More evidence of the bearish consensus. Ho-hum.
Barry, didn’t you predict a fall to 950 in 2005?
http://www.businessweek.com/magazine/content/04_52/b3914408.htm
It might look especially bad to examine your accuracy over the years …
~~~
BR Same game plan — The forecast was a rally up to 1324, then a move down to 950 (Neither happened in 2005)
The whole concept behind “The Folly of Forecasting” is that NOONE is accurate in these forecasts — its just a guess.
Wow, with a 2007 year end target of 13,250, it would seem inflation and housing will again have little to no impact on the markets next year, except for a 10-15% correction in the market midyear.
10,750 downside just seems so darn mild with all the bearish prognostications.
Or is 13,250 finally the blowoff top to this bull run?
MDDwave:
“most forcast the 10 year treasury to drop interest rates(which implies the FED wil drop) which should make the market rally.”
______
This is not necessarily the case, MDDwave. If you remember the Fed starting to lower rates aggressively starting in 2000 through 2003, the market didn’t take off until late 2002 – more than a year after the Fed starting lowering rates. The Fed dropping rates was a realization the economy was in the tank.
YOUR KIDS FUTURE
This is an editorial on the web site economy in crisis. Do you think Americans should be concerned with our kid’s future due to poorly negotiated trade and immigration policy?
PREPARE YOUR KIDS FOR THE FUTURE — AS A SERVANT
EC-In 1994, more than 1 in 8 jobs in America was in manufacturing. In 2014, if US government (Bureau of Labor Statistics) projections are to be believed, that figure will have slipped to less than 1 in 12.
The government is actually telling us in black and white that the policies that they are enacting will decrease absolute and relative manufacturing employment to levels below that of the 1950’s – over 2 million jobs below. In the 1950’s, 30% of US employees were in manufacturing – almost one in three jobs! This country was a relative manufacturing superpower.
In less than 20 years since America put in place some of its most self-devastating policy decisions (NAFTA, WTO, CAFTA, etc.), this country will have almost completely converted from a self-sufficient sovereign state, capable of manufacturing what it needs to sustain and protect itself, to a country of servants – serfs, working at the behest of foreign employers or engaged in the sales, marketing, and distribution of foreign-made goods – working at their discretion, for wages they determine, and forced to pay their prices for needed goods. This is the definition of a servant.
From my blog:
80 economists pulled the 2007 stocks forecasts from theiru2026 thinking spots. The collective mind put S&P500 at +7% by the end of 2007, Nasdaq +9%, Russell 2000 +6%. Barry’s comment is here.
All right. I think predicting the stock market is absolutely impossible, let me, just for fun, pull some numbers from my ass:
* DJ mid year 11,000
* DJ year end 11,000
* S&P 500 mid year 1,200
* S&P 500 year end 1,100
* Nasdaq mid year 2,000
* Nasdaq year end 1,800
* 10-year bond mid year 4.45
* 10-year bond year end 4.50
* Current asset allocation: 5% stocks long, 5% stocks short, 10% international bonds, 30% domestic bonds (no junk), 40% cash.
But I think all this is just a game. Frankly, I have no clue where it’s all going :-)
http://theroxylandr.wordpress.com/2006/12/21/fearless-forecasters/
Stuart Freeman
A.G. Edwards & Sons
was the ‘winner’ of the 2006 BW guess-fest.
It will be interesting to see how this year turns out…..