Harry and Wanda Johnson were watching the evening news when a story came on about the stock market. Their hearts sank as red numbers filled the screen showing a 3% loss in the stock market for the day.
"I know Dave keeps telling us that the ups and downs don’t matter. But they sure feel like they matter. With the country the way it is now, it just feels like things will get worse," Harry said.
"But Harry," Wanda interjected, "remember how Dave showed us that most time periods feel unprecedented but investing in stocks and bonds has never failed?"
Harry rushed to the internet and searched for stock market prognostications.
The first article popped up: "‘Dr. Doom’ Nouriel Roubini says a severe recession will cause stocks to drop 25%—and warns zombie companies are in danger."
Harry said to himself, this guy is an economics professor. This is terrible! And what in the heck is a zombie company?
The next article was titled: The world’s top stock strategist says an ‘earnings recession’ is coming for markets—and it could be similar to what happened during the 2008 financial crisis.
A top stock strategist said this? Oh no! Harry thought.
I’m calling Dave. It seems like the market drop is almost guaranteed, he thought.
"Harry," Dave said on the other side of the phone. "I am going to send you an email that might help you from derailing your long-term financial health."
Harry opened the email. It showed a list of predictions from the past.
Time Magazine, September 1974: "A Gallup poll published last month found that 46% of adults feared a depression similar to the classic one of the 1930s." Yeah, that never happened.
Business Week, August 1979: Cover story, "The Death of Equities." Here’s a sample from the article: "The old attitude of buying solid stocks as a cornerstone for one’s life savings and retirement has simply disappeared … The death of equities is a near-permanent condition." Just three years later, a roaring bull market that lasted twenty years got underway.
Forbes Magazine, July 1993: Cover story, "Bearish on America." Morgan Stanley’s Barton Biggs advised readers to sell domestic stocks, saying Bill Clinton’s policies were bad for the country. What actually happened: The S&P 500 index delivered a compound return of 18.5% over the next seven years.
Business Week, March 1998: "The year 2000 is a unique and unprecedented event .. the first economic disaster to arrive on schedule." Whatever happened to that Y2K disaster? It ended up being quite a yawn, didn’t it?
Fortune Magazine, September 1998: Cover story, "The Crash of ’98: Can The U.S. Economy Hold Up?" Fortune columnist Joseph Nocera wrote, "This time it is different. This time the market won’t be so quick to bounce back … Who can look at the world and not conclude that things have changed dramatically?" Um, not so much. Markets rocketed upward for the next three years.
Money Magazine, April 2004: "Apple's share of the worldwide personal-computer market has shrunk to 2 percent from 3.2 percent five years ago … It's unclear what Jobs can do or plans to do to turn around Apple's fortunes." Yeah, Steve Jobs’ return to Apple didn’t work out well at all, did it?
"Dow Could Crash to 3,000 in 2013" is the title of a piece from 2011. This outlandish prediction came from Harry Dent, CEO of economic research company HS Dent and the author of the ambiguously titled book "The Great Crash Ahead." Dent predicted in 2011 that the Dow would have a tough 2012 and eventually crash to 3,000 in 2013; the index has not been that low since the early 1990s. It’s hovering around 34,000 today.
Think Advisor, April 2022. Market Crash Has Begun; ‘Fireworks’ to Blow by June. Nope. No fireworks.
Dave’s Take: As I’m writing this I’m getting more and more frustrated. All these fund managers and economists and professors spouting out complete nonsense. They are coming from such a place of authority that it is hard to see through the smokescreen.
I have very well-educated clients who still fall for this stuff. Nobody can escape it.
I can’t say this more clearly. If anyone, and I mean anyone, predicts anything about the direction of the stock market they are guessing.
The whole concept is illogical. Let’s say that there is an expert out there that consistently predicts the direction of the markets. Guess what? Every person in the world would know this person’s name. People would be throwing billions of dollars at him, begging just to get on board with his all-knowing brain.
Why would there need to be investment managers at all? If one person has all the answers, the rest of the "experts" would no longer exist.
So if someone forwards you an email today about an imminent financial catastrophe send it to the junk folder.