2017’s Expert Predictions: More Pain than Gain

“This could be the year,” predicted Barron’s in January, “the movie runs backward. Inflation awakens. Bond yields reboot. Stocks stumble. Active management rules.” 1

Or maybe not.

As it was, inflation remained unchanged in 2017. The 10-year Treasury yield went down, not up. Stocks were up 20% in the US and 25% outside the US, making 2017 the best year for global stocks in years. And active management continued to lose out to index funds in terms of performance and investor preference.  So much for Barron’s bold prediction.

Financial media predictions wrapped in shiny headlines such as “Ten Stocks to Buy Now” and “Five All-Star Mutual Funds” appear like clockwork every year to attract attention and spur media sales. They don’t, however, help investors.

A review of this year’s forecasts proves once again what we’ve said herehere, and here. When it comes to predictions, don’t believe what you read.

Last January, Money magazine issued top stock picks from professional investors “who keep beating the market.”2 Their picks included National Oilwell Varco, which declined by 9%, CVS (down 2%) and Kia Motors, which lost 13%. The average return on the experts’ select picks was 17.9%, while the entire stock market gained 19%. That’s right, the best stocks to own as per Money’s experts did worse than all stocks combined—no picking required.

Kiplinger’s predictions for 2017 didn’t fare much better. In “5 Stocks You Should Dump Right Now,”3 experts recommended investors jettison Caterpillar, which ended the year with a 67% gain, Deere (+68%) and Tesla (+61%). Conversely, Kiplinger’s experts recommended investors buy a group of eight stocks including MEDpace (-4%), Palo Alto Networks (-10%) and Regeneron (-10%).4 Ironically, Kiplinger’s “buy list” not only underperformed the broad market by 5%, but underperformed the stocks they urged investors to sell by a whopping 26%.

For their part, U.S. News and World Report exhorted readers to “start 2017 off right” with a “selective” list of 25 of America’s biggest blue chips.5 Without question, blue chips were a great place to be in 2017, with the bellwether Dow Jones Industrial Average of 30 stocks returning 27% over the period.  U.S. News’ select list returned 2% less. So much for paring back the list from 30 to 25….

What’s the takeaway? As 2017 ends and 2018 approaches, the next round of expert predictions will beckon from the headlines. But investors should ignore them, as time and again these predictions fail to deliver anything more than entertainment.

[1] Rublin, Lauren R. “Stocks Could Post Limited Gains in 2017 as Yields Rise.” Barron’s, January 14, 2017.
[2] Bigda, Carolyn. “Top Stock Picks From 4 Professional Investors Who Keep Beating the Market.” Money, January 10, 2017.
[3] Fonda, Daren. “5 Stocks You Should Dump Right Now.” Kiplinger, November 30, 2016.
[4] Fonda, Daren. “8 Good Stocks to Buy Now for 2017.” Kiplinger, April 2017.
[5] Divine, John. “The 25 Best Blue-Chip Stocks to Buy for 2017.” US News and World Report, December 7, 2016.

 

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