You always own the option of having no opinion. There is never any need to get worked up or to trouble your soul about things you can't control.
― Marcus Aurelius, Meditations
Okay. While I do have the option of having no opinion, as Roman Emperor Marcus Aurelius says, it’s not in my makeup nor in my commitment to you not to share my thoughts about the year ahead. Still, the spirit of this meditation resonates with me this year.
The reason is that most investors would be best served fully embracing a stoic approach to the markets, particularly when it comes to annual outlooks. The market and the economy are out of our control, and trying to predict what will happen in the next 12 months is, at best, an imprecise exercise. Frankly, most investors really don’t need an opinion—and probably shouldn’t have one—on the year ahead.
If you’re investing for the long haul and know that spending time in the market rather than trying to time the market will compound your wealth, then what the next year brings doesn’t matter so much. Each year is vital in the moment but fades with time.
Let’s play a quick game. Off the top of your head, do you remember what 500 Index (VFIAX) returned in 2013? Probably not. For the record, the index fund was up 32% that year. Investors had plenty of reasons to avoid the market in 2013 (Fed tapering, government shutdowns and terrorist attacks, to name a few), but the “no opinion” investor who stayed in the market grew their wealth.
Of course, this isn’t how the forecasting game is played. Pundits, talking heads, analysts, strategists—whatever you want to call them—get clicks, likes and followers by having strong opinions whether they are ultimately found to be right or wrong. In the cacophony that is Wall Street, you only get media attention by pounding the table.
The truth is that Wall Street often gets it wrong. Here’s a stat from Jeff Sommer at the New York Times about those year-end price targets the oracles on Wall Street make every year: “the median Wall Street forecast from 2000 through 2023 missed its target by an average 13.8 percentage points annually.”
Not only do strategists miss the market on average, but those “big” attention-grabbing opinions are off by even more. The market is not at a turning point—a bull market peak or a bear market low—every year. In fact, it’s almost never at a turning point at the same time that the calendar is flipping from a year past to a year ahead.
That said, this time last year (December 2022) we actually were at a turning point in the market—and I told you so in my outlook: Just Keep Going. A year ago, inflation was high but starting to fall, investor sentiment was in the dumps, and stocks were firmly in bear market territory. That set the market up to turn around.
Today, those dynamics are not in play. Inflation has already moderated, investor sentiment is neutral, and the stock market has just recovered its bear market losses.
My point is that I don’t expect the media to jump on my 2024 outlook. It’s not radical by any means.
Looking ahead, 2024 feels like a “middle ground” year where we should expect stocks to compound our wealth—because, as I’ll explain, that should be our default setting. We are at neither at a peak nor a trough, but rather somewhere in the middle.
However, we may be at or near a turning point within the market. As I described to you last week when analyzing my Portfolios, the divergences within the 2023 market were extreme. I don’t think those trends are sustainable. This means that 2023’s winners—think technology and growth stocks and the Super Seven—could be 2024’s laggards.
As the Bible says, sometimes the first shall be last, and the last shall be first.