One Big Reason to Beware Mainstream Market Forecasts
Most market predictions simply extrapolate the past into the future
by Bob Stokes
Updated: July 30, 2019
Want a stock market forecast?
Well, they're easy to find. Just scroll through a financial website. A few forecasts will turn out to be right, but most of them will not.
Robert Prechter's classic book Prechter's Perspective explains why:
Most published forecasts are at best descriptions of what already has happened. I never give any forecast a second thought unless it addresses the question of the point at which a change in trend may occur.
Yes -- the chief characteristic of most market forecasts is that they are simply linear extrapolations of the present -- whether bullish or bearish.
Let's go back to the last time we had a major bull market (2003-2007) followed by a major bear market (2007-2009).
After the DJIA had been rising for more than four years, our October 2007 Elliott Wave Financial Forecast noted:
According to Investors Intelligence, investment advisors are furiously jumping on board the rally. As one article put it, "The Federal Reserve has driven most stock market bears into hibernation." According to [another] media account, "Some of the biggest fund managers say they're ready to load up on shares." A commentator, who is in his late 60s, said stocks were the best bargain of his lifetime.
Yet, stocks hit a historic top just 11 days after the October 2007 Elliott Wave Financial Forecast published.
Conversely, after the bear market had been underway for a year-and-a-half, many pundits were forecasting more doom and gloom.
As the March 2009 Elliott Wave Financial Forecast said:
The Daily Sentiment Index (trade-futures.net) just recorded two straight days of 3% S&P bulls, for February 20 and 23. These are the lowest consecutive bullish percentages in history. So sentiment is at a level that can support a market bottom...
Ten days later, the DJIA hit a major bottom and has largely been in bull market mode since.
What does all this have to do with stocks in the summer of 2019?
Well, many of Wall Street's big hitters are hitting the buy button (June 24, Kiplinger)
Hedge Funds' 25 Favorite Blue-Chip Stocks
And, no less than The New York Times says (July 11):
Why Stocks Are Hitting Records as Economic Fears Rise: 'There Is No Alternative'
In other words, low-interest rates are making stocks the only game in town.
But, the question is: when will a trend change occur? Back to what Robert Prechter said about never giving "any forecast a second thought unless it addresses the question of the point at which a change in trend may occur."
EWI's Financial Forecast Service addresses that question -- indeed, right now it provides you with our expected path for stocks through the year 2021.
See our stock market forecast now via a risk-free trial. Look below for details.
Opportunities in TWO Major Markets
Big price moves are anticipated in two widely followed markets -- according to the Elliott wave model.
Yet -- many investors will be totally caught off guard as we enter the second half of summer.
The July Elliott Wave Theorist identifies these markets and helps you to get on the right side of the trends.Read the Theorist now via a 30-day, risk-free trial. Look below for details …
Your Financial Forecast Service Team Helps Put YOU in Control of the Market’s Trends and Turns
Your Financial Forecast Service guides -- three of the best-known market analysts in the world:
- 1. Robert Prechter, Author of 16 market-related books, New York Times Best-Selling Author and Editor of Elliott Wave Theorist
- 2. Steven Hochberg, Editor of the Short Term Update and Co-editor of The Elliott Wave Financial Forecast
- 3. Peter Kendall, Author of The Mania Chronicles and Co-editor of The Elliott Wave Financial Forecast
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