December 23, 2020

As we approach the end of 2020, the market forecasts and predictions for next year are coming out at a breakneck pace. Here are some the latest financial news headlines for 2021 in the:

• “All Risks Fade Away for Markets Next Year” – December 17, 2020¹
• “The Stock Market Could Crash If Covid Is Over Next Year” – December 21, 2020²
• “Sees 20% Returns After ‘Unbelievable’ 2020” – December 18, 2020³
• “Market Crash Coming in 2-3 Years; Economy ‘Already Dead’” – December 3, 2020⁴
• “The S&P 500 Can Jump 20% by the End of 2021, Goldman Sachs Says” – November 9, 2020⁵
• Stocks could stumble in early 2021 as investor sentiment surges past market fundamentals, Goldman
• Sachs says” – December 8, 2020⁶
• “A majority of analysts surveyed by CNBC expect an 8%-22% upside for the S&P 500 in 2021” – December 8, 2020 ⁷
• “Why Stocks Could Crash by 40% in April” – December 3, 2020⁸

How can an investor make sense of such different views? The truth is they can’t make sense of it and shouldnot even try. At Prato Capital, we have shown in our past January newsletters and last week’s blog that anyreliable predictions of where the stock market will be at a specific time is not possible. These predictions are nothing more than a guess and should be viewed strictly as entertainment. Tune out this noise created by the financial news media.

Those making the predictions are never held responsible and these predictions can be detrimental to any investment plan. Unfortunately, some investors use these predictions as part of their investment strategy.

A sound investing strategy does not rely on yearly market predictions. A sound investing strategy is a plan based on your risk tolerance as part of a Financial Life Plan that avoids the guessing of what the market will do next year and lets you focus on your future financial goals.

A headline from The New York Times sums it up best: “Clueless About 2020, Wall Street Forecasters Are at It Again for 2021”.⁹

References

• ¹ https://www.bloomberg.com/news/videos/2020-12-17/all-risks-fade-away-for-markets-next-year-says-jonathan-golub-video
• ² https://www.forbes.com/sites/danrunkevicius/2020/12/21/the-stock-market-could-crash-if-covid-is-over-next- year/?sh=16b9b84c41a2
• ³ https://www.bloomberg.com/news/videos/2020-12-18/cathie-wood-sees-20-returns-after-unbelievable-2020-video-kiuixp92
• ⁴ https://www.thinkadvisor.com/2020/12/03/harry-dent-market-crash-coming-in-2-3-years-economy-already-dead/
• ⁵ https://www.barrons.com/articles/sp-500-can-hit-4300-by-end-of-2021-goldman-sachs-51605113139
• ⁶ https://markets.businessinsider.com/news/stocks/stock-market-outlook-stretched-investor-positioning-sp500-strategy-goldman- sachs-2020-12-1029874597
• ⁷ https://www.cnbc.com/2020/12/08/stock-market-strategists-see-sp-500-at-4000-4500-in-2021.html
• ⁸ https://www.wyattresearch.com/article/market-crash-why-stocks-could-drop-40-april-2020/
• ⁹ https://www.nytimes.com/2020/12/18/business/stock-market-forecasts-wall-street.html