From Morningstar:

According to CNBC, 56% of millionaires believe that US equities will lose at least 10% in the next year—a prediction that has only happened six times in the previous 50 years. This stark pessimism was reminiscent of the market pre-2008—a sign that we should expect the opposite.

Problem #1: Recency Bias
Nevertheless, this poll was unscientific, and statistically, an online survey like this isn’t reliable. Investors often fall to recency bias, which is influenced by recent events rather than a long-term perspective.

Problem #2: Group Think
Professionals tend to avoid recency bias due to their business school education, but the difficulties they encounter come with economic forecasts. Wall Street’s median S&P 500 projection for 2023 is 4.5%-slightly conservative, but more accurate than retail investors.

Problem #3: Wishful Thinking
Bank of America, BlackRock, and Leon Cooperman are among those forecasting a strong 2024 for the stock market. While these analyses are intermixed with real data, wishful thinking can influence predictions.

Why Should I Even Bother With Forecasts, Then?
While forecasts aren’t completely reliable, they can be useful if you understand the logic behind them. By learning from forecasts, you can gain valuable knowledge about investments and the general economy. Additionally, they can be useful for understanding the logic behind stock market movement.



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