Checking in on 2013 Predictions

TCI Missy

Jan 2, 2014

By: Sam Swift, CFA, CFP®

As we begin a new year, I figured it was time to have some fun with all those early 2013 predictions. Let’s see how a sampling of them did, shall we?

The following predictions were from the first article I found when I google searched for 2013 predictions and can be found here: 2013 Market Predictions from 10 Top Money Managers. Also, just so you know I wasn’t cherry picking, here’s another article along the same lines with a completely different set of predictions: How are these “can’t miss” predictions turning out? (By the way, that article is only through the first three quarters, but all the numbers have held up through the rest of the year). Anyway, let’s get on with it.

Predictor #1: David Tepper, Appaloosa Management—“the main thing right now is to be long equities”

There’s nothing wrong with David’s prediction here. Even though he didn’t specify which equities to be in, I’m still saying his prediction was correct as the US markets are up nearly 30% on the year. We’re 1/1 and off to a good start. Total: 1/1

Predictor #2: Byron Wien, Blackstone Advisory Partners—the S&P 500 will fall 200 points in first half, there will be a rally in commodity prices and a reversal in financial stocks

Uh-oh, Byron just ruined our good start. The S&P gained about 150 points in the first half (and another 175 in the second half), commodity indices were down around 10% for the year, and financials were up over 15%. Total: 1/4

Predictor #3: Ray Dalio, Bridgewater Associates—“the shift of cash…will be a game changer…into equities, real estate, gold, basically everything”

Ray was right about a shift of cash out of safer investments. Unfortunately, it went only into equities and skipped real estate and gold. Real Estate was flat for the year while gold was down 25%. Oops. One out of three ain’t bad. Total: 2/7

Predictor #4: Jeff Gundlach, DoubleLine Capital—shares of Apple could break below $400; sell US stocks and buy Chinese stocks

Jeff was technically correct about Apple falling below $400 as it hit just below that mark a few times during mid-year. I hope he issued some buy recommendations shortly thereafter, however, as it currently sits near $560. Still, I’ll give him that one. I can’t give him the other predictions however as US stocks are up about 30% while Chinese stocks are down around 5% for another one for three performance. Total: 3/10

Predictor #5: Jim Rogers, former manager Quantum Fund—because of the Fed policy, one should short US stocks while being long commodities

Poor Jim was right about the continuing easy money policies of the Fed, but failed to predict the consequences as US stocks were up big and commodities down. This is a classic example of predicting the event correctly, but failing to predict the market reaction. Alas, Jim goes 0-2. Total: 3/12

Predictor #6: Bob Doll, Nuveen Asset Management—likes US and emerging market stocks, but concerned about European and Japanese equities.

Bob hit the nail on the head as regards US stocks. Unfortunately, emerging stocks were down a couple percent for the year while Europe and Japan were up 15% and 20% respectively. To be fair, he didn’t specify, so when he said he was concerned about European and Japanese equities, he might have been concerned about excessively positive returns. I’m not thinking that’s the case though, so one out of four it is. Total: 4/16

Predictor #7: Mario Gabelli, GAMCO Investors—positive on US stocks but doesn’t think market will close up more than 5% in 2013

Mario had the misfortune of getting too specific. US stocks were indeed positive, but to the tune of 30%, not 5%. I’m feeling generous, so I’m going to give him credit for at least being positive on US stocks and rate him one out of two. Total: 5/18

Predictor #8: Felix Zulauf, Zug—“I expect the 1st half of 2013 to be friendly to equity markets and the 2nd to be unfriendly”

Felix correctly predicted the first half, but missed the second half of the year which continued the high positive returns of the first. He referred to re-emerging unresolved crises to explain the predicted second half swoon, and though he didn’t specify, you could make an argument that the government shutdown fit that narrative. So, he may have predicted the event, but definitely not the market consequences. He did oddly preface his specific timing call with the caveat that “it is difficult to time such things”, so maybe Felix is learning. One for two. Total: 6/19

Predictor #9: Brian Rogers, T. Rowe Price—expected a fairly good year for equities, especially relative to fixed income

Well done, Brian. We have our second 100% successful prediction. It’s Interesting that both Brian and David stayed away from specific predictions and basically just said they were bullish on equities for the year. That’s good to keep in mind in case you’re ever asked your thoughts on the market for the next year—just say you’re bullish and you’ll probably be right about 75% of the time since historically, that’s how often the market has positive annual returns. Anyway, Brian’s prediction brings up our average. Total: 7/20

Predictor #10: Scott Black, Delphi Management—thought the market looked cheap, but also said the market was down 18.8% during the previous debt ceiling fight and “you can’t rule out the possibility of something similar happening this year”

Scott gets a 50% on this one. He was right that the market was cheap, but he hedged a little much for my taste regarding the debt ceiling. That brings us to a total of 8/22 for a batting average of .364. We’d have ourselves a terrific All-star shortstop with that average, but unfortunately these are professional financial prognosticators and that’s just not going to cut it.

Seriously though, it’s almost too easy to collect bad predictions every year. Prediction is worthless at best and harmful at worst when it comes to your investments. Take the wasted time spent on predicting and apply it to planning and you’ll be much better off long-term.

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