In an online presentation on Monday, Savita Subramanian, the head of U.S. When the market surpassed that level, the bank raised its 2021 “forecast” belatedly, with the benefit of hindsight.īut Bank of America’s perspective has been consistent in this sense: It is negative about the U.S.
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I wouldn’t give that claim much credence, because until September, Bank of America predicted that the S&P 500 would end this year at 3,800. stock and bond markets, predicting that the S&P 500 will be virtually flat over the next year. Bank of America’s year-end forecast is intriguing, for example. People in finance are frequently well-informed, even if their specific predictions can’t be counted on. “The numbers are meaningless in a sense,” he said, and continued, with an engaging smile: “Whenever I make a forecast, and I have done this for a number of years, I know it is going to be wrong.” But, he added, “The numbers are an illustration of where things are going.” And they provide grounding, he said, to “have a thematic discussion with our clients.” Marcelo Carvalho, the head of global emerging markets research, went further. Olivia Frieser, the global head of strategy and economics research for the bank, said: “These are our best efforts in having a framework and giving our views” to clients, who want to know what the strategists think. Their answers were candid and, I think, quite reasonable. And if they were not confident in their forecasting abilities, why did they even bother? On Tuesday, for example, at the end of an annual outlook session conducted online, I asked a group of experts at BNP Paribas, the global banking giant, whether they believed their predictions could possibly be accurate, given the inability of humans to forecast the future. And despite the air of omniscience pervading many of the longer-term forecasts being issued these days, there is reason to believe that just about everyone churning them out knows that their ability to see into the future is quite limited, to put it politely. These unanswered questions are affecting the plans of millions of people and the movements of the markets, moment by moment. While the World Health Organization has already declared Omicron to be “a variant of concern,” it will take time before a scientific consensus emerges on exactly how transmissible Omicron is and whether it is more able to evade the protections of current vaccines or more likely to cause severe illness than other forms of the coronavirus. Or the various issues may intertwine: A virulent Covid-19 surge could shock the economy sufficiently to reduce inflation, slow overall growth and delay the monetary tightening that is increasingly being signaled by the Federal Reserve and other central banks. They may still be, if Omicron turns out to be relatively benign. Rising inflation, labor shortages, supply chain bottlenecks and the Federal Reserve’s likely response to these issues were the biggest problems on the horizon for the markets in the United States.
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Until then, the prevailing narrative in the markets appeared to be that the global economy was recovering smartly from nearly two years of pandemic shocks. 26, which was Black Friday in the United States and the first trading day after an Omicron case was reported in South Africa.
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The S&P 500 has been oscillating with heightened volatility ever since it declined 2.3 percent in light trading on Nov. That placed it about 20 percent above the median year-end forecast. But by Friday, even after the stock market took a pounding in response to news of the first confirmed Omicron case in the United States, the benchmark index stood above 4,500. Last year, for example, I noted that the median Wall Street forecast from 2000 through 2020 missed its target by an average 12.9 percentage points - which was more than double the actual average annual performance of the stock market.įor 2021, so far, Wall Street’s predictions are off the mark by even more than that.Ī year ago, the median forecast for the closing level of the S&P 500 in 2021 was 3,800, according to a Bloomberg survey. Year after year, market predictions run headlong into a basic problem: It’s simply impossible to forecast the economy or the markets with accuracy and consistency, as many academic studies have shown - and as I’ve pointed out in previous Decembers. There are myriad forecasts with specific numbers - and if any of them turn out to be correct, it will be an accident.