Cup of Joe: Markets in December

Every December, FactSet aggregates the predictions of Wall St analysts of where they think the S&P 500 Index will end up in the coming year.

• In 13 of the past 20 years, analysts have over-estimated the annual return of the index, or 65% of the time.
• The average difference between the final index price and the aggregate price estimate was just under 7%.
• This tells us two things: They’re typically overconfident;  and they’re usually wrong by a lot.

Don’t put any stock in end of year predictions, this is essentially an impossible task.

• Take 2024 for example, the long-awaited interest rate cuts happened at a pace much slower than anyone anticipated. Yet the market did much better than anyone had expected.
• Even the well-educated guesses are based on unknowable assumptions like inflation, interest rates, consumer behavior, etc.  Not to mention the unexpected external events that always happen, such as global conflict, geopolitical events, pandemics, and breakthrough technology.
• Never make substantial investing decisions based on what amounts to guess-work.

With the market, obviously you can’t know the future, or what exactly is going to affect it. So when it comes to your portfolio, be ready for anything, within the investment parameters you’ve set for yourself.   Be mentally prepared too.  Tell yourself, “If the market has a very good year, I’m going to harvest some profits and rebalance.”   Or, conversely, “If the markets down, I’m going to stay invested.”

• Take charge over market predictions by scheduling a meeting with your advisor.  Let them know what’s changing in the upcoming year and make sure it’s taken care of.  Voice to them what’s of concern to you and let us come up with a solution or figure out how to limit the risk.  If your goals have changed, even temporarily, meet with us to make the necessary adjustments.

In closing, if you hear a lot of predictions in the next few weeks for what the market is going to do in 2025, don’t hang your hat on any of them. They’re mostly just sounds bytes.  What matters is the work you’re doing with your advisor and your Argent Bridge investing team, to make sure you are creating your own success.

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