April 2025 Insights

Market Predictions

At the start of each year, the familiar question arises: “What do you think will happen in the markets this year?” While the most honest answer is that it’s impossible to know with certainty, strategists from major financial firms such as JP Morgan, Goldman Sachs, and Deutsche Bank continue to publish short-term forecasts. These include year-end price targets for indexes like the S&P 500, which are then aggregated into a consensus target price.

While popular amongst the investor community, these year-end target prices are rarely accurate. Even the smartest strategists can’t predict the future with certainty, particularly over such short time frames. Historical data highlights this: in 8 of the last 10 years, the consensus strategist price forecast for the S&P 500 at the start of the year missed the actual year-end level by more than 10 percentage points!

Source: Meridian via Bloomberg. Data as of 31/12/2024. Percentage difference between actual S&P 500 year-end price and consensus estimates.

Another important point: strategists have consistently struggled to predict market downturns. This was evident during major drawdowns over the past 25 years, including the Dotcom bust in the early 2000s, the Global Financial Crisis in 2008, and the sudden decline seen in 2022 owing to sharp rate hikes. This trend continued into 2025, with analysts failing to foresee the dramatic shifts in US trade policy, though, to be fair, who could have predicted that? As shown in the chart below, strategist forecasts for 2025 have been significantly revised following the tariff-related turmoil, in some cases falling by as much as 20%.

Source: Bloomberg 24/04/2025

Investing is a long-term pursuit, as the short-term is too volatile to predict with any certainty. As a result, we focus on the long-term potential of the companies and asset classes we invest in, paying less attention to short-term forecasts.