Business Week Forecasts

  Business Week Forecasts
Think about all the stock market experts’ market predictions you’ve
read or heard about from 2000 through 2002. Ahandful of these characters
have been let go or changed firms. Even well-known technicians
do not have very good track records calling the market top.
Let’s take a look at the forecasting accuracy of the so-called prophets
of Wall Street for the years 2000 through 2003. Consider the results of
these seers in predicting the market indices just one year into the
future.
Business Week publishes a list of the experts’ individual predictions
in its year-end issue. The number of prognosticators
tracked by the magazine for the years 2000 through 2003 has varied
between 38 to 65, with 50 being the average. This list represents
a solid cross-section of the well-known market strategists. Some of
the well-known names on a number of the yearly lists included
Joseph V. Battipaglia, Elaine Garzarelli, Edward Yardeni, Bernie
Schaeffer, Edward Kerschner, Lazlo Birinyi, Jr., Hugh Johnson,
Philip J. Orlando, and Jeffrey Applegate.
Table 1-1 shows the composite results of all of their forecasts
over four years for the Dow Jones Industrial Average (DJIA), the
Standard & Poor’s 500 (S&P 500), and the Nasdaq Composite
Index. The table delineates for each year the high, low, and consensus
forecast of all the forecasters for each of the three popular
market averages. As you can see, starting with the first forecast for
the 2000 stock market made at the end of 1999, the forecasters had
a poor record. In fact, in each of the past three years their forecasts
have gotten progressively worse. Forecasters, as a group, were simply
overly optimistic.
There are always a few bears around, but even the bears did
not predict the actual lows of the market in 2002. The most inaccurate
predictions were for the Nasdaq, as the actual close compared
to the consensus forecast was off by 54 percent in 2000, 84 percent
in 2001, and 67 percent in 2002. In conclusion, the “best and the
brightest” appeared to be not so bright or right. To be fair, their
actual stock picks for their clients could have been quite different,
and perhaps closer to the mark. For the sake of their clients, I hope
this is so.