Predicting How the Stock Market Will Perform Next Week
A headline touting how the stock market will perform in a week's time should be ignored as nonsensical. Anything can happen in a week. A month is equally unpredictable. But prognostications about the stock market for the upcoming year appeal to many people as worthy of consideration.
The problem is that one year is still a relatively short period of time. Who knows what will happen? Covid's path during 2021 and the market's reaction to it, for example, were far from assured. Only hindsight makes it obvious. What will happen in 2022 is equally opaque.
There is also the problem of whose opinions to accept. The experts tend to have divergent views, with many of them failing miserably. When asked "what experts think," I'm inclined to respond "everything." You can find an expert to support almost any view.
What Happened in 2021?
Last year, Barron's polled 10 investment companies (like Goldman Sachs and JP Morgan). As we entered 2021, the S&P 500 Index stood at 3,756. These experts offered a wide range of targets for the year -- from a low of 3,800 to a high of 4,400. In fact, the S&P 500 Index finished 2021 at 4,766, well above even the most optimistic opinions.
Predictions for 2022
Yahoo Finance collected the forecast of 14 strategists for 2022. Again, the experts had quite divergent views -- from 4,400, constituting a loss, to 5,300.
Investing for the long run diminishes the need to guess what will happen in any one year. If you are concerned about near-term fluctuations, diversification can help smooth out the ride by utilizing investments that do not move in sync with the stock market.
In the end, your risk tolerance, investment time horizon, and financial goals should be paramount in any investment decision. Feel free to contact me to discuss my thoughts on how to deal with such uncertainty.
Words of Wisdom
To be conscious that you are ignorant is a great step to knowledge.
-- Benjamin Disraeli