Nobody has a crystal ball that helps them predict future market returns

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In 2013, Wall Street Journal Columnist Jason Zweig lamented the challenges of making consistent advice sound fresh:

“My job is to write the exact same thing between 50 and 100 times a year in such a way that neither my editors nor my readers will ever think I am repeating myself. That’s because good advice rarely changes, while markets change constantly. The temptation to pander is almost irresistible. And while people need good advice, what they want is advice that sounds good.”

Unlike Mr. Zweig, I will not try to make my  prediction for 2022 sound different than those I made for 2020 and 2021: in 2022, the U.S. stock market will probably be up, but it might be down. I am confident of my prediction because it reflects what has happened historically — the stock market has appreciated about two in every three years, regardless of whatever had gone before – see chart.

The market is usually up, but is down about one-third of the time

Credit: St. Louis Trust & Family Office, data from Factset

Investing in the stock market is like flipping a weighted coin that comes up heads most of the time and sometimes tails. This is about as specific as we can be about market returns, which is unsatisfying because it leaves us feeling uncertain about the future.

The Biggest Misconception About Investing

The biggest misconception about successful investing is that you have to know what will happen in the future. Sure, a crystal ball would be great, but nobody has one. Study after study has shown that expert stock market predictions are worthless. Jeff Sommer, writing in the New York Times
NYT
, 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.” Even worse, during those 20 years, the median Wall Street prediction was never negative, yet the market was down six of those years, or nearly a third. No guru reliably predicts what will happen. Sure, some experts call it right occasionally, but none of them are consistent.

Using market predictions to inform investment decisions is like preparing your boat to go to sea based on weather forecasts that someone made up. Sooner or later, you’ll be unprepared for a storm or weighed down with life rafts and safety gear when you could be fair weather sailing. It would …….

Source: https://www.forbes.com/sites/johnjennings/2021/12/29/what-will-the-stock-market-return-in-2022/