5 minBusiness
Wall Street’s year-ahead forecasts miss most big market moves, a decade-long review finds
A review of 135 forecasts from fifteen institutions over ten years found most failed to name the events that moved markets, and that the outlooks are rarely held to account.
Wall Street banks, asset managers and geopolitical-risk firms publish year-ahead outlooks every December, and a new review of a decade of those forecasts suggests they are rarely useful as guides to investing. A scorecard of 135 forecasts published over the past ten years by fifteen institutions, including Morgan Stanley, Citi, Goldman Sachs, Teneo and the International Monetary Fund, found that only 16 percent named the event that went on to move markets. Only three calls explained how that event would reach an investor’s portfolio.
The consensus forecast for 2026 illustrates the problem. Most forecasters expected the Federal Reserve to cut interest rates, which would have made borrowing cheaper. The cuts did not come, and borrowing became more expensive. For a buyer who waited to purchase a home on that expectation, the median-priced house now carries a monthly cost that is $314 higher. The author notes that such misses are easy to dismiss in a single year, but no one typically keeps score across years.
Even the figure that banks most often commit to, the year-end target for the S&P 500, performed poorly. Forecasters expected gains in 2022, a year when stocks fell 19 percent. In 2023 they were too pessimistic, and stocks rose 24 percent. The forecasters were wrong in both cases, and in opposite directions. Going into 2023, most large banks also predicted a recession that did not materialize, while record sums sat in money-market funds as stocks rallied. Savers and retirees who followed that caution missed those gains, and the forecasters faced no consequences.
The author argues that the format itself is part of the problem. Many outlooks list themes, such as risk from artificial intelligence or from Donald Trump, without probabilities, deadlines or a way to be proven wrong. Such statements may be true, but they are not forecasts. Uncertainty is uncomfortable for corporate boards, and a structured outlook offers relief even when it adds little accuracy. In many cases, the review suggests, the decision has already been made and the document serves to validate it.
The reports matter beyond the boardroom. Pension funds, university endowments and 401(k) retirement plans put trillions of dollars to work with these outlooks in front of them. When the consensus leans in one direction, a large share of that money tends to follow. The author also points to political risk, which the outlook format was originally built to treat as largely an emerging-market concern. Tariffs announced in Washington or policy shifts in Tokyo can reprice markets around the world within a single afternoon, and the motives of national leaders are often difficult to read from economic data alone.
The review also cautions against singling out individual forecasters on the strength of one accurate call. It cites Jiang Xueqin, a Yale-educated lecturer who gained attention online after clips circulated of him predicting the US-Iran war and the closure of the Strait of Hormuz. The author acknowledges the call was made, but notes that Jiang has made hundreds of predictions, most of them unresolved or wrong. Without that full record, a single hit is not evidence of skill.
Finance has faced this question before. For decades, investors paid active fund managers for stock-picking skill. Over the 15 years to 2025, the author reports, nine in ten active large-cap funds trailed the S&P 500 they were paid to beat. Passive funds now hold more US fund assets than active ones, and fees have fallen. The year-ahead outlook, the author argues, has so far escaped similar scrutiny because no one has systematically kept score. Anyone can run the same test on the next year’s outlooks.
Keeping score does not require demanding certainty. Before this summer’s World Cup, a model from the data firm Opta named Spain, France, England and Argentina as the four likeliest semifinalists, and all four reached that stage. The model drew on observable data such as player performance and past results. Forecasts do not need to be right every time to be useful, the author says. A useful outlook identifies which developments to watch and states what each would mean for money: if a given event occurs, then portfolios should move in a particular direction by a particular date. Where the evidence supports it, the outlook should attach a number to the risk. Such an approach, the author concludes, is less satisfying than a list of headline risks, but it gives readers a way to interpret the news as it arrives.
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