Economists make forecasts and the more notable ones make it to the popular press. The problem is no one can precict the future and the variables so numerous that intepretations frequently differ. One of the reasons we strive to design what we call an all-weather portfolio is because no one has a clear crystal ball. Below are some notable economists and their predictions.
Jeremy Siegel, professor of finance at Wharton School and author of Stocks for the Long Run, predicted that the U.S. would avoid a recession in 2008 and that financial stocks would outperform the S&P 500. Actually, financial stocks underperformed all market sectors, and the recession brought back memories of the Great Depression.
Nouriel Roubini, professor of economics, New York University, told investors to avoid the stock markets in 2009, warning of a further loss of 50% of their wealth. Investors who followed this advice missed the 24% rise in the S&P 500.
Jim Cramer, (Mad Money, CNBC), predicted that Goldman Sachs would finish 2008 at $300 a share and Google’s share price would reach $1,000. Goldman Sachs finished 2008 at $84, and Google ended the year at $307.
Byron Wien, a legendary Wall Street strategies and Blackstone economist, forecast that the U.S. economy would grow at an inflation-adjusted 5% in 2010. Further, that unemployment would fall below 9%; the Fed would hike short-term interest rates above 2%; the 10-year treasury would yield 5.5% by year’s end; and the S&P 500 would have zero gains in 2010. These forecasts were wrong.
Everyone is entitled to an opinion, and it seems the “experts” are no better at predicting than you or we are.