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The following is an excerpt from Kirr Marbach & Co.’s fourth-quarter client letter, available at kirrmar.com.
Just like in 2023 (and almost all years, for that matter), the stock market in 2024 defied the predictions and prognostications of highly paid Wall Street strategists and other soothsayers and “experts.” I believe it’s impossible to accurately forecast markets and/or the economy, so making predictions is a waste of time.
For example, the table below lists 2024 year-end price targets for the Standard & Poor’s 500 Index, which ended 2023 at 4,770. J.P. Morgan had the most pessimistic target (4,200, or a decline of 11.9%). In fact, four of these oracles forecast a decline for the S&P 500 in 2024. The average, or “consensus,” target was 4,861, or a minimal gain of 1.9%. Yardeni Research had the most optimistic target (5,400, a gain of 13.2%). The S&P 500 closed 2024 at 5,882 (up 23.3%), 21% above the average target and 8.9% above even the most bullish prediction.
Last year was not an outlier. In fact, Bespoke determined “consensus” annual targets missed by an average of 14.2 percentage points going back to 2000.
In spite of their dismal record, “experts” keep predicting, and many investors continue to pay attention. Don’t be one of them! Heeding “expert” predictions can be extremely dangerous and costly; such predictions should be considered “for entertainment purposes only.”
That said, I do have a “non-forecast” for 2025, which is nearly identical to my previous “non-forecasts.”
◗ The economy/financial markets will do something that surprises us (and the “experts”). In 2020, it was the pandemic. In 2022, it was Russia’s invasion of Ukraine. In 2023, it was the collapse of Silicon Valley Bank, the second-largest in history. In 2025, NOBODY knows what it will be.
◗ The financial media will enrich itself by emotionalizing headlines and short-term market moves to entice you to click and tune in. It’s nothing more than clickbait.
◗ Investors who tune in to the news and evaluate their performance often will experience more stress and anxiety than those who don’t.
◗ Investing in the stock market will be unpleasant at times. Historically, the stock market goes down roughly half the time on a daily basis. Since 1900, U.S. stocks have experienced 40(!) “corrections” (drops of more than 10%) and “bear markets” (drops of more than 20%), or one every 3.12 years.
◗ Investors who move to cash, waiting for a “better time,” will suffer significant uncertainty and anxiety about when and how to get back in. According to Crandall-Pierce, if you invested $100 in the S&P 500 on Jan. 1, 1975, and left it alone, on Dec. 31, 2024 (50 years later), you would have had $8,578.81. However, if you allowed yourself to get scared out of stocks and missed just the single best day in each of the 50 years, you would have had only $1,464.65, or 83% less. As Charlie Munger, Warren Buffett’s right-hand man and “architect” of Berkshire-Hathaway’s investment philosophy said, “The big money isn’t in the buying or selling, but in the waiting.”
◗ Your investment decisions and reactions to market events will have a significant impact on your personal investment return.
◗ You will be tempted to change your investment strategy based on market performance, expert forecasts and/or your personal beliefs about the future.
Conviction, patience and discipline are virtues every investor should develop. Buffett has described successful investing as “simple but not easy.” You must try to ignore the noise and focus on what really matters to your financial success.•
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Kim is Kirr Marbach & Co.’s chief operating officer and chief compliance officer. He can be reached at 812-376-9444 or mickey@kirrmar.com.
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