April 22, 2020

What the Market Might Have Looked Like in A World Without Coronavirus

What the Market Might Have Looked Like in A World Without Coronavirus

“I’ve long felt that the only value of stock forecasters is to make fortune-tellers look good. Even now, I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”- Warren Buffett

Prophecy, it is said, was given to fools. The future, like any complex problem, has far too many variables to be predicted. People with a decent understanding of statistics and probabilities can easily understand why. 

The same thing can be said about the stock market. It has never been, nor will it ever be possible to predict ahead of time what the market’s next move is going to be. The coronavirus pandemic, which has sent global markets reeling, is testimony to the fact. 

But even though we can’t predict financial markets, as traders, we all try to make educated guesses and use them to our advantage. And while some of us make a point of avoiding the mainstream financial media when forming an opinion, others like to see what the likes of CNBC, Bloomberg and MarketWatch have to say before investing their hard-earned money.

Whether you belong to the former or the latter, we thought it might be fun, interesting or even somewhat amusing to reflect back on some of the headlines from a time not so long ago when we lived in a world where the only corona we ever heard about was beer.

MarketWatch- December 11, 2019: “Central bank says current level of low U.S. rates is ‘appropriate'”

“The Federal Reserve on Wednesday offered a more upbeat view on the economy and indicated it doesn’t expect to raise interest rates again for at least another year. The Fed lowered its forecast for the unemployment rate in 2020 to 3.5% from 3.7%, but inflation is still expected to remain a tick below 2% for the full year.”

Financial Times- December 11, 2019: “Wall Street expects bull run to continue in 2020”

“Wall Street is predicting that the record-setting US stock market rally will continue next year, supported by the Federal Reserve’s accommodative interest-rate policy and a resilient domestic economy. The average price target for the S&P 500 in 2020 stands at 3,278 — a 4.6 per cent increase from the current level — based on forecasts from eight major banks.”

CNN Business- December 31, 2019: “Investors have plenty to be optimistic about”

“2019 was a heck of a year for US stocks, but can the market keep soaring in 2020? Stocks are entering 2020 with a bit less of a tailwind than they had in 2019. Investors still have plenty to be optimistic about, though and expect US stocks will keep climbing higher in the new year.” 

The Motley Fool- January 13, 2020: “There will be no recession in 2020 “

The stock market will have another positive year. Despite the stock market delivering returns that were well above the historic norms in 2019, this year should deliver more gains to investors. Historical annual return data shows that the stock market tends to do very well in years following at least a 20% gain.”

And last but not least, maybe the most “interesting” of them all…

Businessinsider.com- December 30, 2019: “Here is one bank’s ‘outrageous’ prediction that could shake markets in 2020”

“We see 2020 as a year where at nearly every turn, disruption of the status quo is an overriding theme,” Saxo Bank chief economist Steen Jakobsen said in a statement. “The year could represent one big pendulum swing to opposites in politics, monetary and fiscal policy and, not least, the environment.” Boy, did he ever get that right. 

Our point today? We often expect investment experts to have crystal balls that allow them to see how the stock market is going to perform in the future. The problem with expert predictions isn’t that they are wrong- which they often are. The problem with economic forecasts is that they can’t anticipate unforeseen events like the coronavirus pandemic. Try and remember that the next time you listen to these predictions and base investment decisions on them.

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