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2021 Predictions

Show Description:

 

Jason and Alex recap some of the predictions made by strategists in 2020. If there was ever a year that we were reminded of the difficulty of making stock market predictions, it was 2020. To exemplify the difficulty of making market forecasts, we can look in the rear-view mirror at several examples of 2020 market forecasts and see how they turned out. A well-known financial publication surveyed 10 Wall Street strategists to gather their outlook1, below are a few takeaways:

  • The consensus of the strategists was that the S&P 500 would rise 4.1% in 2020, a substantial difference from the 18.4% that the index returned, despite all the headwinds faced. Even the panel’s most bullish member undershot where the S&P 500 would end up, estimating the index would rise to 3500 by year end.
  • The strategists predicted that the 10-Year Treasury would end the year yielding 1.89%, a number more than double the 0.919%2 that we saw on December 31st.
  • The strategists also didn’t expect the Fed to lower the federal funds rate to the level where it sits today, a target of 0% – 0.25%. The lowest range any strategist put on the rate was 1.25% – 1.50%.
  • From a sector standpoint, 8/10 strategists were overweight financials going into 2020; the financial sector ended up being one of four sectors that experienced loses in 2020. Only two of the strategists were overweight the technology sector which ended up being the best performing sector. On the contrary, only one member of the panel was underweight energy, the sector that saw the lowest returns for the year.

Another interesting highlight was that while the dramatic downturn was swift and steep, with the S&P 500 falling 33.79% from peak to trough, the recovery would be just as quick, as the index followed that up with its best 50-day period in history3 and returned 70.18% from March 24th through year end. 4

Jason and Alex remind listeners that success in the market doesn’t require making accurate predictions, it requires the ability to stay in the game. An investor who is able to stay disciplined with their financial plan that their adviser sets out for them will be better off than one who constantly makes decisions based on “expert” market forecasts.

Then the show gets interesting. Jason and Alex, against their better judgement and purely for entertainment purposes, attempt to make predictions about how 2021 will play out. These predictions are not meant to be investment advice in any way, shape or form. In fact the point they are making is how fun it will be to see how their predictions pan out. Fun being the objective and not meant for a successful, long term investment strategy. Enjoy the show!

 

Sources:

1 Nicholas Jasinski, “Barrons 2020 Outlook: Stocks are Headed Higher. Here’s Which Sectors Will Benefit the Most”, Barron’s, December 16, 2020

2 https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx

3 Pippa Stevens, “This is the greatest 50-day rally in the history of the S&P 500”, CNBC, June 4, 2020

4 Source: Morningstar

This information is provided for registered investment advisors and institutional investors and is not intended for public use. Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

This information is not meant to constitute investment advice, a recommendation of any securities product or investment strategy (including account type), or an offer of any services or products for sale, nor is it intended to provide a sufficient basis on which to make an investment decision. Investors should consult with a financial professional regarding their individual circumstances before making investment decisions.

Past Performance is no guarantee of future results. Indices are not available for direct investment.

 

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