Market Predictions and Where They Go Wrong

Life can feel a little like a sitcom every January – a bit formulaic. You can rest assured that gyms and meal planning services will see record enrollments. People will swear off credit cards, for good this time. It’ll snow in Buffalo.

Maybe most predictable will be the annual predictions. Stocks will soar in 2026. Or they’ll tumble into a bear market. The market prognostication happens every year. But how did 2025’s forecasts actually fare – better or worse than your attendance track record at the local gym?

2025 IN REVIEW

The S&P 500 kicked off 2025 at around 5,900. Nineteen Wall Street strategists tracked by Bloomberg predicted year-end levels ranging from 6,000 to 7,100 (that’s a return anywhere from 1.7% to 20%+, which should tell you right off the bat how reliable the guesses were), with an average of 6,614 (a 12% increase).

In the first half of the year, it was looking like the forecasts would be way off. The year started calmly, then came the shock: President Trump’s Liberation Day tariffs. Investors weren’t prepared for the scale of the announcement and markets plunged in response.

And lo and behold, midyear forecasts pronounced much more modest market expectations.

But then, as tariff threats eased and fears faded, stocks rebounded. In a development that surprised no one this time, forecasts looked much more rosy again.

As of mid-November, we’re looking at about a 15% gain year-to-date. Within the initially projected range, but let’s admit – it’s quite a range.

WHY PREDICTIONS MISS THE MARK

When an analyst’s forecast ends up way out in left field, is it because they’re incompetent? Not really.

The S&P 500, of course, reflects the combined value of 500 companies, each influenced by specific company news, industry trends, economic forces, politics and global events. When new information hits, markets move. That’s normal. Guessing where it will land is like forecasting every twist in a really juicy TV drama. But it means those neat January predictions rarely hold up.

History proves the point: In 2022, most experts predicted gains. Instead, the market fell sharply as inflation proved stickier than expected. Surprise!

INTEREST RATES: ANOTHER LESSON IN UNCERTAINTY

Another wildly off-the-mark set of predictions: the fed funds rate. A little over a year ago, markets forecasted it would finish 2025 under 3%. Reality? Rates stayed above 3.5% because inflation cooled more slowly than expected. The gap between forecasts and actual rates tells the story: Predicting the future is hard.

SO WHAT CAN WE SAY ABOUT 2026?

So if you can’t accurately predict what the markets will do, can you really rely on them to support your financial plan and goals? You can.

Because markets have patterns of behavior, and that’s what we can count on going into 2026: Stocks can have a wider range of potential returns than high-quality bonds, though they come with more risk. Long-term averages are more predictable than single-year outcomes. Diversification helps reduce risk. These are factors that allow us to make long-term plans for your money (not short-term), and they don’t reset every time the calendar flips.

These patterns can also help you decide how you’re going to thoughtfully respond, both when markets do their thing and ahead of time, when you’re building your portfolio.

Knowing when patterns are evolving and what’s just noisy nonsense is both art and science. The models underlying our portfolio construction process are built on our analysis of factors that drive long-term performance, applied to different types of stocks and bonds. We’re not about gambling your money on unreliable short-term predictions; we’re about using powerfully built and intelligently deployed algorithms to help you reach goals on your own timeline.

BOTTOM LINE

The forecasts you’ll hear for 2026? Treat them as entertainment, not investment advice. The world is full of surprises – tariffs, inflation, geopolitics and more. But disciplined diversification and a long-term approach are a better plan than crystal-ball guessing over the long term.

And if you want to make predictions for 2026, here’s one that’s just as tricky (and more fun): Who will win the World Cup when it comes to North America next year?