Barron’s Experts Show Their Wealth Destroying Advice ... Again

Every year Barron’s comes out with their annual roundtable of economic and stock market strategists and experts. The most recent issue provides several predictions and identifies opportunities for investors in 2022. I have only one thing to say: Reader Beware!

The Market is Not Predictable

There are several enduring truths when it comes to investing. One of the most persistent truths is that the stock market cannot be accurately predicted. There is ample evidence of this. Perhaps the greatest evidence is that no investment manager or fund always outperforms. If the market were predictable, why would anyone choose to outperform at one time and then choose to underperform?

This fact does not matter to the “experts.” They will keep predicting so long as media outlets such as Barron’s allows them to. As I mention in my new book, Investment Illusions, their job isn’t to get things right. Their job is notoriety. And perhaps they follow the adage that any news, even bad news, is good for them and the firm.

The issue I have is that these “experts” – despite all the evidence to the contrary – keep giving forecasts…and keep getting them wrong. Unfortunately, because of the illusion of certainty their confident forecasts offer, many investors fall trap to their words, and often pay a dear price.

The 2021 Scorecard

Kudos to Barron’s for printing the “expert” scorecard for 2021. It was awful – I mean really bad. This was not an anomaly. They are consistently underperforming, but 2021 was an especially bad year for the experts. Given their persistent history of underperforming predictions, you would think Barron’s would try their luck with other “experts.” But that isn’t the case; like Wall Street there doesn’t seem to be any accountability for making bad calls.

Barron’s 2021 Report Card consists of over 100 stocks that strategists said would outperform the markets and provided excellent rationale and evidence at the time of their selection. And some stocks did outperform. Many did not. The average return of all the expert picks was 5.0%. You read that right. In a year where popular stock market indexes such as the S&P 500 and Wilshire 5000 (total market index) were up over 25%, the “experts” underperformed by a whopping 20%! And that is just on the stocks they recommended investors buy.

For investors that also like to short stocks, the “experts” provided four names they expected to underperform in 2021, again with great rationale at the time of prediction. How did they do? Well, instead of being negative or only slightly positive, as a group of four stocks, they were up 165% (heavily influenced by Gamestop). When you short stocks, you want the price to go down. Following the short recommendations would have cost an investor dearly.

Investor Takeaway

So my question for any investor is: Are you sure you want to read the 2022 predictions by the same group of experts? Remember that every prediction, every year, will be confident and have excellent rationale behind it. It will make sense. The fact that “expert” predictions often underperform is evidence that the market can’t be predicted, no matter what someone says or what we may wish were true.

So what do we do? That is why having a plan with a detailed investment strategy is essential. Investment decisions are best made when they have to do with the investor’s personal situation and the plan. Investing based upon feelings, whims, or even “expert” predictions often results in poor investment performance.

Ignore the noise. Ignore the predictions. Focus on the plan.

Related: Everything is Transitory