Weekly Market Pulse: The Times Are Still A-Changin'

2025-01-06 12:51:00 ET

Summary

• It is also impossible to predict the course of the economy over the next 12 months.
• If you are thinking about the next 10 years, I think it is reasonable to assume historical earnings growth and a P/E that falls to the mean.
• Small and midcap stocks performed well but, as with value, underperformed on a relative basis versus large company stocks.

At the beginning of every year, investment firms around the world publish their year-ahead outlook for markets and the economy. These prognostications can be interesting, but not for the targets they place on various market or economic metrics. It is difficult to predict the long-term return of the stock market in advance, but it is impossible to predict the short-term return. And make no mistake, a year is short term. It is also impossible to predict the course of the economy over the next 12 months. All most of these “outlook” pieces do is extrapolate the existing short-term trends into the near future. Sometimes it works, most of the time it doesn’t. The only useful information in these think pieces is the narrative, how these firms and their clients are thinking about the economy and markets. That can give us clues about how they are positioned and how they might have to change if their expectations are not met....

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