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Stocks Gained +16% in 2020; Wall Street Expects +7.6% In 2021

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Despite the unexpected +16.3% return on stocks in 2020 and although the worst days of the COVID 19 crisis are likely still ahead, Wall Street strategists’ mean forecast for the Standard & Poor’s 500 in 2021 is for a +7.6% gain.

The Wall Street forecasts in this chart have been compiled annually since 2007 based on an article published in Barron’s in December every year. The venerable financial magazine asks strategists from 10 leading Wall Street firms for their forecast for the S&P 500 stock index and which industry sectors they expect to be the biggest winners and losers in the next 12 months.

The strategists’ forecasts in the December 21, 2020 issue of Barron’s ranged from 3800, equivalent to a +1% gain – by Citi and Bank of America Securities -- to a prediction by J.P. Morgan that the index would close 2021 at 4400, which would be a +17% gain. The mean forecast of the 10 strategists was that the S&P 500 would end 2021 at 4040 for a +7.6%.

Predicting the future of the stock market for any given 12-month period is not something even the top strategists at the largest firms can do, as is shown in this chart. It’s not a strategic investment approach for investors planning to buy and hold stocks for many years.

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The mean forecast of Wall Street’s strategists in Barron’s in December 2020 called for the Standard & Poor’s 500 stock index to close 2020 at 3030 with just a +3% gain. They were way off.

The index closed Thursday at 3,756.07, setting a new record high. The gain for 2020 of 16.3% was a huge surprise, considering the public health crisis and related economic problems.

The index gained +0.64% from Wednesday, +1.42% from a week ago, and +50.67% from the March 23rd bear market low.

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