Another stock prediction that missed the mark

Market Analyze CBS/iStockphoto

(MoneyWatch) Regular readers of my blog know that one of my favorite hobbies is collecting forecasts and then holding the forecasters accountable. An August article in Esquire gives us an opportunity to do just that.

The tagline for the piece -- "But, Soft! What Light Through Yonder Window Breaks?" -- said that "after Election Day, the economy and the stock market are going to catch fire." Continued the article:

... the markets were poised to soar in November, as soon as the uncertainty about the political direction of our country is settled. Regardless of who wins the presidency and whether either house changes hands, regardless of Europe's woes, the unprecedented amount of cash sitting on the corporate sidelines will be deployed and set in motion a growth spurt unseen since Monica Lewinsky, the peace dividend and the Internet.

The S&P 500 Index closed October at 1,412, after gaining about 2.4 percent since the end of July, when all the uncertainty was looming over investors. It ended November at 1,416. Unless your definition of a soaring market includes an increase of 0.3 percent, we can say that this prediction was well off the mark.

Just as blind squirrels occasionally find acorns, occasionally a forecast will turn out to be correct. The financial media is quick to anoint such sightless rodents as gurus. Of course, when future forecasts turn out wrong, rarely are the gurus held accountable.

The ancient Scythians discouraged frivolous prophecies by burning to death any soothsayer whose predictions didn't come true. We have to wonder how many gurus and media pundits would be in business today if such standards were still in place.

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    Larry Swedroe is director of research for The BAM Alliance. He has authored or co-authored 13 books, including his most recent, Think, Act, and Invest Like Warren Buffett. His opinions and comments expressed on this site are his own and may not accurately reflect those of the firm.

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