Womp womp big bank price targets?

In an older piece at the beginning of this year, I reviewed where the S&P 500 ended for 2023 versus where the big banks had predicted it would. Spoiler alert, they were basically all wrong. The closest, Deutsche Bank, was off by about 270 points. There was only one person who nailed their price target and that was the GOAT, Tom Lee. He had said 4,750 and we ended up around 4,770.

Now we have had the 2024 year-end price targets for some time. I think the market has caught almost everyone offside. We are already starting to see some banks revise their forecasts. (One of my favorite things that happens on Wall St. If you’re wrong, just revise mid-year to something that might be right depending on the momentum of the market at that time).

What I want people to understand from this piece is that it is INSANELY hard to forecast market performance. Generally speaking, markets are efficient for the retail investor. There are hedge funds and high-frequency trading shops with technology and data that would make our trading platforms look futile. Even these professional shops have a tough time predicting an index’s annual performance over short periods.

Here is where some of the big players saw the S&P 500 ending for 2024:

JP Morgan: 4,200

Morgan Stanley: 4,500

UBS: 4,600

Wells Fargo: 4,625

Goldman Sachs: 4,700

Barclays: 4,800

Deutsche Bank: 5,100

Currently, the S&P 500 is trading above 5,300. We are only 5 months into the year though. There is a lot of time for these forecasts to be proven right. Either way, we are already seeing some revisions of price targets. Deutsche Bank has come out and announced that they are now forecasting the S&P 500 to reach 5,500 by end of year.

It is a funny game that is played each year. Wall Street is somewhat of one giant groupthink. These people are swayed by the same psychological factors that affect retail. Momentum is a huge one, or as Selena Gomez explained it once, the hot hand fallacy. If everything just keeps going up, people are more inclined to think it cannot go down.

Anyway, as an advisor, I am stoked that the markets continue to rip. Who wouldn’t be?! But I do not care what people think the market will do, where they predict it to end up over the course of the next 7 months, or what they did last week.

We care about how the market performs over 10-, 20-, or 30 years. Here is something that is a fact: The S&P 500 has never been negative over a 20-year time frame spanning from 1919-2022.

Why is that more important to me? Because we can always say that “generally, stocks go up.” We don’t have to play guessing games; we don’t have to gamble on short periods. We don’t have to care what JP Morgan says or thinks. We can stay focused on what matters: growing income, furthering our savings and investments, and living our lives.

The S&P 500 is up 12% year to date. No one had that on their bingo card. Risk-takers have been rewarded. I continue to be cautiously optimistic and subscribe to my long-term mindset. It is pretty tough to make an accurate forecast of where stocks will end up a year from now, it is a bit easier to say where they’ll be in 20 years. My guess is that stocks will appreciate over the next 20 years, as they have during any 20-year time frame from 1919-2022.

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