2018 Predictions: Different Buffet, Same Bloat

It’s my favorite time of year again. No, not the sleigh bells, cheese balls, and seemingly endless trays of holiday treats.

I love those, too.

What I really look forward to is Wall Street’s buffet of “Where to Invest Now” recommendations. These market prediction pieces serve an important purpose: to remind us, regardless of how compelling they sound at the time, that a year later these predictions will be revealed as little more than guesswork.

With that in mind, here’s a look back at some of last year’s market predictions:

The Promise of Bitcoin

Last December, you couldn’t turn on the TV or open a paper without hearing about Bitcoin. The cryptocurrency had soared from $1,000 just twelve months earlier to nearly $20,000. While we encouraged folks to avoid it, Barron’s claimed Bitcoin was already changing the entire banking industry. The expert analyst who’d predicted Bitcoin’s meteoric rise in 2017 said on CNBC that Bitcoin would hit $100,000 by year-end 2018. Today, one bitcoin is worth exactly $3,524.90, a 12-month decline of 83%.

The Best Stock Picks from the Best Analysts

CNBC turned to Wall Street’s best stock analysts to produce its “5 Top Stock Picks” for 2018. Chosen based on the success of their past recommendations, five all-star analysts each picked one stock they were sure would outperform in a choppy market.

Of the five stocks recommended, three lost nearly a quarter of their value, with shoemaker Skechers USA (-39%) dropping the most. From recommendation date through the time of this writing, the five picks from the highly touted analysts fell -14%, far worse than the -2% return of the U.S. stock market.

Independent Researchers Weigh In

For its “Top 10 Picks for 2018,” Forbes took a different approach. Rather than seek advice from highly rated Wall Street analysts, the magazine looked to independent research firm Argus, which Forbes claimed was “not biased by the business of advising companies, trading stocks or managing money.”

Sadly, for readers following Forbes’ advice, the independent approach produced an outcome quite common in the stock prediction game: Forbes’ Top 10 underperformed the total U.S. stock market by 2.5%.

Kiplinger Tries to Hedge its Bets

Somewhat unconventionally, Kiplinger offered readers not only “8 Good Stocks to Buy Now” but a list of “5 Stocks You Should Dump Right Now.”

Of the eight buy-rated stocks, four fell by 20% or more, with Delphi Automotive (-72%) causing the most damage. During a flat period for the U.S. stock market, Kiplinger’s list of “buys” fell an average of -13%.

Remarkably, the five stocks Kiplinger urged investors to sell actually rose by 2%. That’s right—the stocks Kiplinger recommended selling outperformed the stocks the publication recommended buying by fifteen percentage points.

Skip the Prediction Buffet

Each year at this time, there’s a smorgasbord of market predictions. Remember, no matter the source, “expert” predictions about the direction of the stock market—let alone the near-term prospects for just a handful of stocks—are more bloat than portfolio nutrition.

The best advice for 2019 is to skip the prediction buffet and stick to a sensible diet of diversification and discipline. This is the best way to emerge financially healthy—regardless of what the new year brings.