Wall Street's Strategists About As Good As Monkeys Throwing Darts
The Standard & Poor's 500 had its best week of 2016, gaining 2.8% in the four days of trading ended Friday, February 19.
2016 has gotten off to a difficult start for stocks. The S&P 500 started the year at 2044 and closed Friday at 1918, about a 5% loss for the first seven weeks of the year.
Meyer had a successful career on Wall Street as a portfolio manager and senior strategist for one of the world's largest investment companies before launching an independent economic research firm in 2009. Every year since 2007, Meyer has tracked the sector predictions of what Barron's says are Wall Street's "top strategists," and every year the strategists' picks prove to be wrong.
Meyer says the 10 forecasts made by Wall Street's top strategists in a Barron's cover story in December 2014 were not even close to picking the best and worst sectors. To be fair, the Wall Street strategists in 2015 did make two correct calls on the 10 industry sectors comprising the Standard & Poor's 500 index. They were right about tech and utilities. However, the Barron's panelists missed three calls and were totally wrong on three more.
Energy, which the Barron's strategists, as a group, liked - three of the 10 Wall Street firms had been bullish on energy in December 2014 and one was bearish on energy stocks - lost nearly a quarter of their value in 2015. Yet more of the Wall Street strategists had been bullish than bearish on the energy sector.
Financials and industrials were the among the industry sectors that the strategists, as a group, favored. Financial and industrials trailed the S&P 500.
More of the 10 strategists had been neutral or negative on the two best-performing sectors, consumer discretionary and consumer staples. These two sectors topped the list of 10 S&P industry groups.
If the top Wall Strategists' picks seem to not be highly correlated with actual returns, it is because that is the reality.
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Investing: What to expect in 2020
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