10 Worst Financial & Economic Predictions of 2021

Forecasting short-term trends is notoriously difficult, yet every year Wall Street gurus, economists and leading financial institutions issue predictions about what they believe will happen in global markets over the next twelve months. Sometimes they get it right--more often than not, they don’t. And sometimes they make spectacularly bad calls.

With rising inflation, choppy markets, and a continuing pandemic, prediction was particularly difficult last year. But that didn’t stop the gurus.

This would all be harmless nonsense if billions of dollars weren’t wasted trying to follow this flawed advice. This is why we at Symmetry Partners do not believe in short-term predictions or forecasting and instead believe in diversified, long-term portfolios grounded in evidence, data, and academic research.

Here are 10 of some of the worst predictions about markets and economies in 2021.

1. Prediction: It takes just “one extra snowflake to start an avalanche — and boom!” In a July 2021 interview with ThinkAdvisor, futurist, Harry S. Dent Jr., aka The Contrarian’s Contrarian, predicated that the market was likely to “blow at the end of this month, if not September.” According to Dent, stocks have no place in investors’ portfolios, and he forecast that most equities would plummet 80% by the fall of 2021.

What actually happened: The S&P 500 ended 2021 up 26.9%. There was no crash in July or during the fall. Dent, author of the 2009 book, The Great Depression Ahead, and the 2011 book, The Great Crash Ahead, has a notoriously bad track record of failed alarmist predictions. Yet, for whatever reason (dramatic headlines generate clicks?) he is still interviewed by respectable media outlets.

2. Prediction: In the Motley Fool in December of 2020, Matthew Frankel, CFP^® made 4 Bold Predictions for the Stock Market in 2021.
   1. Reopening will happen quicker than most expect
   2. Reopening stocks will dramatically outperform the market
   3. The S&P 500 will fall in 2021
   4. Oil will finish 2021 above $70 per barrel

What actually happened: Frankel acknowledged that these predictions were bold. They were also spectacularly wrong. Only one actually happened, with oil ending the year slightly above $79 a barrel. Batting .250 doesn’t even put you the Minor Leagues.

3. Prediction: A majority of 20 Wall Street analysts surveyed by CNBC in December 2020 believed the U.S. dollar weakness would continue in 2021. They also expected an 8%-22% upside for the S&P 500 in 2021 and expected the following stocks to outperform: Exxon Mobil, Chevron, Baker Hughes, Boeing, Qualcomm, Visa, and Disney.

What actually happened: Instead of showing weakness, the U.S. dollar rose 6.4%. The S&P 500 significantly exceeded these analysts’ expectations, returning almost 27%. And their expert stock picks all underperformed the S&P, returning an average of -3.5%.

4. Prediction: Every year, Wall Street firms make specific calls on where the S&P 500 (and other major indices will end the year). Every year they tend to be unduly pessimistic or optimistic. They missed 2020 by a wide margin, and no major firm predicted the Great Recession. But hope springs eternal….MarketWatch looked at the predictions of 16 major firms in December 2020 and found that, on average, they were predicting the S&P would end 2021 up about 8%--with a high prediction of 19% and a low of 2%. MarketWatch was extremely skeptical of what they regarded as excessively optimistic predictions.

What actually happened: The S&P 500 significantly outperformed Wall Street expectations—closing out 2021 with a 26.9% return.

5. Prediction: Every year, the financial media is full of stock picks such as The 22 Best Stocks to Buy for 2022 or 10 Best Growth Stocks to Buy for 2022. Typically, these underperform major indices. 5 Stocks to Buy in 2021 for Rapid-Fire Growth from Yahoo/Investor Place was no different.

What actually happened: All 5 rapid growth stocks (Nio, Stem, Affirm, Canoo, and

Momentus) ended 2021 in negative territory. The best performer lost nearly 18%. The worst, almost 78%. On average, these 5 stocks lost a spectacular 41% in a year that generally favored Growth stocks.

6. Prediction: According to Charles Schwab’s 2021 Market Outlook, “After a full cycle of outperformance, relative valuations and earnings expectations often get stretched and begin to reverse with the catalyst of a new cycle. These factors have aligned once again, favoring international stocks….This backdrop may see the U.S. pass the baton of global growth leadership to Europe, favoring international stocks.”

What actually happened: Despite the investment gobbledygook of catalysts and reversing cycles, the baton of global growth stayed in America. Global Developed Markets, as measured by the MSCI World ex USA index returned 12.62%, performing only about half as well as the U.S.

7. Prediction: Never mind Europe, perhaps Asia is where the real opportunities for growth can be found. J. P. Morgan in their Investment Outlook 2021, argued that, “Asian equities still have the potential to outperform developed markets by 2.2% a year over the next 10 to 15 years. Mounting signs that the 10-year-old US dollar bull market is fading further reinforce our view that the next 10 years might go down as the Asian decade.

What actually happened: The dollar enjoyed its strongest year since 2015. While Asian markets experienced significant downturns. Chinese markets lost almost 22%. Korea was down more than 8%. And Japan eked out a measly 1.71% return. The Asian decade was not off to a strong start.

8. Prediction: Some of the brightest minds in finance gravitate towards the hedge fund industry—not least because of the enormous fees hedge funds charge (typically 2% on assets and 20% of profits). Still institutions and high-net-worth investors have trillions invested in hedge funds—in large part because hedge funds are supposed to do well, no matter what happens in the markets. As “smart money,” hedge funds are supposed to have insights into world markets unavailable to ordinary investors.

What actually happened: Hedge funds as a whole have lagged the S&P 500 significantly for years. And 2021 was no exception, with hedge funds, on average, returning 7.47%. Every major type of strategy, from Equity Long/Short to Quantitative to Event to Multi Strategy, was outperformed by the S&P 500 by 6% to 30%.

9. Prediction: Money Manager Michael Burry, best known for betting against the housing bubble in the mid-2000s (and played by Christian Bale in "The Big Short"), predicted a big stock market crash repeatedly in 2021. In February, he said, "The market is dancing on a knife's edge.” In March, he compared speculation around Bitcoin, Tesla, and meme companies to the dot-com and housing bubbles, tweeting that “the fall will be dramatic and painful” from these “insane heights.” By June, we were now in the "Greatest Speculative Bubble of All Time in All Things,” which will lead to, “the mother of all crashes." In November, he was less dramatically comparing the current market to overvalued markets of the 1920s and 1990s.

What actually happened: There was no apocalyptic stock market meltdown in 2021. Many Wall Street “legends” are investors who made one significant and successful prediction—which they then coast on for the rest of their careers. And if a prediction doesn’t come true, just move the goal posts. Like a stopped clock, eventually you will be right.

10. Prediction: 2021 saw a new kind of prediction with meme stocks—stocks that were promoted and hyped on social media and then soared (briefly) to irrational heights. These included, GameStop (GME), which jumped 1,915% in the first few weeks of 2011. Also, AMC, which rose 1,496% through May 2021. Other meme-favored companies included Plug Power (PLUG), Virgin Galactic (SPCE), Palantir (PLTR), and BlackBerry (BB). For those too busy to spend time on Tik Tok and subreddits, one money manager even created a meme stocks ETF: VanEck Vectors Social Sentiment (BUZZ).

What actually happened: There may be wisdom in crowds, but apparently not when it comes to meme stocks. For many of these stocks, the buzz ran into buzz saws after their initial surges. GameStop dropped 57% from its highs. AMC also dropped 57%. And the VanEck Vectors Social Sentiment ETF ended the year down nearly 10%.

Data: Morningstar

Symmetry Partners, LLC is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, or excluded or exempted from registration requirements. No one should assume that future performance of any specific investment, investment strategy, product, or non-investment related content made reference to directly or indirectly in this material will be profitable. You should not assume any discussion or information contained in this material will serve as the receipt of, or as a substitute for, personalized investment advice. As with any investment strategy, there is the possibility of profitability as well as loss.