“A decade ago, I made a goal to read more history and fewer forecasts. It was one of the most enlightening changes of my life.” – Morgan Housel, author & investor
Christmas music, holiday shopping, ugly sweaters, navigating the weather, represent the beautiful chaos of another year in the books. It also means our 8th edition of “Tis the Season for Wall Street Forecasting ” series (check out 2024, 2023, and 2022)!
We cover how Wall Street did with their 2024 S&P 500 price predictions (horrendously) and what our overly confident friends are saying about 2025.
Let’s see how Wall Street’s 2024 forecasts held up.
These predictions were made in December 2023.
Consensus Wall Street Price Target for the S&P 500 in 2024
Wall Street’s S&P 500 price target 4,800 (simple average)
Actual S&P 500 index level 6,064 (as of 12/18/24)
Wall Street missed by a whopping 26.3% in 2024.
If you’re keeping score at home, in 2022 the experts were off by 23.5%, 2023’s swing & miss came in at 15%!
The most accurate forecast came from Yardeni Research with an S&P 500 price target of 5,400.
The most inaccurate forecast came from BCA Research with an S&P 500 price target of 3,300.
It’s safe to say 2024 was a terrible year for those in the forecasting business (and those that make investment decisions based on fruitless predictions).
Undeterred by their woeful track record, Wall Street is publishing 2025 S&P 500 predictions (the below list goes from pessimistic to optimistic S&P 500 price targets). As of 12/18/24, the S&P 500’s price level is 6,064.
BCA Research 4,450
Stifel 5,500
UBS 6,400
Citi 6,500
J.P. Morgan 6,500
Goldman Sachs 6,500
Morgan Stanley 6,500
CFRA 6,585
Ned Davis Research 6,600
RBC 6,600
Barclays 6,600
Fundstrat 6,600
Bank of America 6,666
BMO 6,700
Societe Generale 6,750
DataTrek Research 6,840
Yardeni Research 7,000
Deutsche Bank 7,000
Wells Fargo 7,007
Oppenheimer 7,100
Source: Business Insider
The simple average of the above forecasts for the S&P 500 price level for 2025 is ~6,520, which equates to a ~7.5% price return from current levels (not including dividends).
The most pessimistic forecast (again) comes from BCA Research which calls for a negative return of -26.6% for the S&P 500 in 2025.
The most optimistic forecast comes from Oppenheimer which calls for a return of 17% for the S&P 500 in 2025.
What’s wrong with making a prediction about what the market does next?
Nothing, but like a movie or book, it should come with the warning label “for entertainment purposes only.”
Here are a few reasons smart sounding predictions could be hazardous to your wealth…
- Investors end up clinging to the forecast that best fits their personal narrative. For example, a pessimistic investor will seek out a pessimistic forecast as validation that their view is correct.
- In the digital age, every person has a microphone through social channels. The most outlandish forecast gets the most attention. Pessimism sounds sophisticated and smart. Optimism sounds aloof and boring.
- There’s no penalty for being wrong. No one is keeping score (except us). No one is accountable for the predictions made. A person could be wrong for 20 years in a row and still be presented as an expert.
- Wall Street seldom sticks to their original forecast. It’s standard practice to change a forecast based on market action. For example, if a bank predicted a bad year for the market and stocks race out to a hot start (like 2024), it’s common practice to revise the original prediction higher mid-year.
- Sentiment tends to follow price. After a bad year (2022), the predictions for the following year are often pessimistic. Following a great year (2024), Wall Street assumes the party will keep going and the next year will be positive. It’s an exercise in the human tendency to overweight what just happened (also known as recency bias).
The biggest problem with playing the predication game is that it conditions the wrong behavior. Playing the market oracle based on short-term market noise is a recipe for disaster. In my opinion, positioning beats predicting.
My advice is not to ignore Wall Street forecasts, market research, or commentary. Rather, take it with a grain of salt. Think of it as entertainment or an intellectually stimulating exercise. If a financial professional tells you what happens next, run the other way.
Pure Portfolios is proud to be forecast free since our founding in 2016.
Want a better way to think about potential market outcomes? Check out “Probable Probabilities.”
Have a question or comment? Shoot us a note at insight@pureportfolios.com