Thoughtfully Crafted Nonsense
Editor's note: Our offices will be closed next Friday for our company holiday party. As a result, we'll publish next week's This Week on Wall Street issue a few days early, on Wednesday, December 18. We wish everyone a happy holiday season!
Dear subscriber,
Who cares about this week? Everyone is talking about 2025...
This time of the year is when all the investment banks give their market outlooks for the next 12 months. As usual, they'll put out a dozen or so pages of elegant forecasting, including an achingly specific target for 2025.
Currently, the S&P 500 Index sits at about 6,050. It's up 27% year to date – and the big research firms expect it to keep climbing. Here's what they're forecasting for the next year...
Why did Bank of America (BAC) choose the ominous-sounding 6,666 as its target? And does Wells Fargo (WFC) think it's playing The Price Is Right with its 7,007?
I'm not sure... At Stansberry Research, we don't publish such a number.
That's because it's all an exercise in false precision. These projections are really just thoughtfully crafted noise. And they don't help investors like us.
Now, we do read them as an exercise in due diligence on our part. It's good to see what these banks may be thinking about the year ahead. And there are some insights in the reasoning behind the numbers.
But you shouldn't use these forecasts to adjust your investments. A year is a long time in the markets. And these projections typically turn out to be worthless, often fairly quickly.
Just look at 2024...
Strategists expected a 3% gain, and markets have delivered about 32% (so far)... only off by an order of magnitude.
There's also the poor analysts who published outlooks in December 2019... only to have the pandemic roil markets two months later.
We understand that investment banks have a range of clients – including pensions, insurance companies, and hedge funds. Those clients need numbers to plug into models. So the research firms are delivering what these institutions want.
As an individual investor, though, you should be buying high-quality businesses at reasonable valuations and holding over time.
It doesn't matter if Morgan Stanley (MS) expects the S&P 500 to end 2025 at 6,500 or 6,000 or 500. That number doesn't have a role in your plan for the year.
But good golly, this year's outlooks all march to the exact same tune...
I first saw this highlighted by Warren Pies of 3Fourteen Research earlier this week.
As he pointed out on social platform X, the S&P 500 targets for the year have clustered very tightly between 6,500 and 7,000. The 6,500 number is particularly popular.
Usually, there's a wider range of opinions.
As Pies explained, we saw such tight bands only twice in recent history, in 2008 and 2017. And both times, the consensus was completely wrong...
In 2008, everyone was confident of a rising market, but the global financial crisis sent markets crashing.
In 2017, strategists were fairly conservative with an expected return of about 4.5%... but the market soared 18.5%.
The point being, when everyone is confident and the big investment banks have reached a consensus opinion, that's when the market will surprise you.
While it doesn't hurt to read strategists' 2025 outlooks and try to divine some insights on the year ahead, you should never base your investments on such forecasting.
Rather, you should beware the groupthink on Wall Street this time of the year. After all, markets sure love to blow up a consensus.
What Our Experts Are Reading and Sharing...
The U.S. Bureau of Labor Statistics released its official inflation report this Wednesday. And the numbers came in a little hot... Prices are up 0.3% on the month, making for an annualized inflation rate around 3.6%. On Thursday, initial jobless claims clocked in at 242,000, topping the expected 220,000. High inflation and a weaker labor market put the Federal Reserve in a bad position. But unless these numbers become a trend, it's too early to worry.
Google announced a big breakthrough in quantum-computing research. As highlighted in a paper published by Nature the tech giant has unveiled a new quantum-computing chip named Willow. It performed a computation in five minutes that would've taken today's fastest (non-quantum) supercomputer 10 septillion years. (For context, that's older than the universe.) Alphabet (GOOGL) shares are already up about 10% since the Nature paper. You can read more on Willow by accessing the company's official announcement here.
Our Stansberry Research colleague Jeff Havenstein recently explained how U.S. politics are driving the markets today. Investors excited over what's next for our economy are pouring money into U.S. stocks... and leaving foreign stocks behind. Jeff's prescription in the Health & Wealth Bulletin is to stay bullish, but cautious.
New Research in The Stansberry Investor Suite...
This week, President-elect Donald Trump joked that Canada could become the 51st U.S. state.
I suspect that Canadian Prime Minister Justin Trudeau didn't appreciate that...
We're pretty sure this isn't an actual policy proposal by Trump. Still, everyone on Wall Street is scrambling to figure out what policies Trump actually will enact and what they'll look like.
For instance, how will Trump's tariffs work? Will the Department of Government Efficiency really cut major government programs? Will Trump allow the Fed to maintain its independence... or will he pressure it to keep rates low?
There's a lot we just don't know.
So this week in The Stansberry Investor Suite, we're focusing on a sector that, at least today, takes the least amount of guesswork...
In today's issue, Alan Gula and the Stansberry's Investment Advisory team highlight a sector that's sure to benefit from Trump's election.
Then, they walk you through one of the Investment Advisory monitors to show you precisely how to value the companies in this sector... and spot investment opportunities ahead of Trump's changes.
Stansberry Investor Suite subscribers can read the entire report here.
If you don't already subscribe to The Stansberry Investor Suite – and want to learn more about our new special package of research – click here.
Until next week,
Matt Weinschenk
Director of Research
What do you think about This Week on Wall Street? Send any and all feedback to thisweek@stansberryresearch.com. We read every e-mail you send in.