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It’s easy to make bold predictions about the stock market. It’s not so easy to get those predictions right.
The stock market is never predictable. Anyone who tells you they know what’s going to happen is lying. Knowing that it’s a fool’s game trying to forecast what will happen next on Wall Street, I nevertheless made “Five Bold Stock Market Predictions for 2014” back in December. These weren’t things I knew were going to happen. Just gut feelings based on some combination of logic, momentum and history.
Halfway through 2014, it’s time to check in on my predictions. As easy as those predictions were, it’s even easier NOT to keep tabs on them – especially if they go horribly wrong.
In the interest of accountability – and because it’s a fun exercise – let’s look back at my “five bold predictions” and see how they’re doing through the first six months of 2014.
Update on My Stock Market Predictions for 2014
- The S&P 500 Will Top 2,000.
Result: It hasn’t gotten there yet. But it’s not far off. The benchmark U.S. index topped out at 1,985.44 earlier this month, and has risen 7% year-to-date. While a potential correction looms, I still think the S&P will get to 2,000 before the year is out. All it would take is another 1.25% push. In this bull market, that can happen in a day.
- The Market Will Get its Long-Awaited 10% Correction.
Result: Fortunately, it’s not looking good for this prediction. I thought a pullback might occur in the summer, the market’s usual sell-off period. Instead, here we are in the third week of July and stocks have actually performed better since the “Sell in May” period began. Since May 1, the S&P 500 has risen 5%.
A mini pullback still may occur. But I think a correction of 10% or more won’t happen until at least 2015.
- QE3 ‘Tapering’ Will Start Before the Summer.
Result: Right on the money. The Fed began “tapering” back its $85-billion-a-month bond buybacks in January. Under new Fed Chief Janet Yellen’s watch, it’s already down to $35 billion per month. Given the brewing fear on Wall Street over the taper this time a year ago, I thought tapering might be the thing that triggers a mass correction. Instead, investors have largely ignored Fed action of late.
Perhaps investors are realizing that it’s actually a good thing that the Federal Reserve feels comfortable enough in the U.S. economy to curtail its stimulus efforts. At this rate, the Fed may pull the plug entirely on QE3 before the year is out.
- European Markets Will Outperform U.S. Markets.
Result: U.S. markets still reign. In 2013, U.S. markets outperformed European markets by more than two to one. This year, that trend is holding. The Stoxx Europe Total Market Index is up 3.5% in 2014, exactly half the return of the 7% run-up in the S&P 500. The European recovery is taking a bit longer than I – and many economists – had expected. Meanwhile, U.S. stocks continue to reach all-time highs as fears of a double-dip recession have completely disappeared.
- Your Mutual Fund Manager Won’t Beat the Market.
Result: You tell me. This prediction was, of course, more of a statement on how it pays to invest on your own. Entering 2014, only 71 of 17,785 actively managed mutual and hedge funds had beaten the S&P 500 over the previous decade. That’s 0.4%. I said it then and I’ll say it now: four-tenths of a percent is not very good odds. Might as well save yourself the management fees and invest on your own…
….with a little help from Wyatt Investment Research, of course.
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