Barron’s annual surveys of financial strategists is the perfect tool to judge the predictive abilities of Wall Street’s best minds. Every year since 2006, the survey asks leading strategists from financial institutions like Goldman Sachs, J.P. Morgan, and Morgan Stanley to predict how the S&P 500 will perform in the year ahead. It then takes the averages of these forecasts and releases them to the public. If their predictions were perfect, they would line up exactly with the actual S&P 500 performance graph year after year, as seen below:

In reality what we see are consistent incorrect predictions:

This should not be surprising. After all, study after study have shown that no one can consistently predict market movements. The real question is what role these predictions should play in our investment strategies. At KDM, we believe that predicting the market often leads to poor investment decisions, and that long-term diversification based on your current financial situation and goals gives you the highest chance to achieve financial success. For help with your investment strategy, visit our website www.kdminvest.com or give Jeff a call at 630-232-9097.

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