The beginning of the end of market price targets
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Illustration: Sarah Grillo/Axios
One of the silliest traditions on Wall Street — the publication of price targets for the S&P 500 — just might be starting to die.
Why it matters: If there's a silver lining to the record concentration of the S&P 500 among a handful of tech giants, it's that analysts increasingly are unwilling to even pretend that market moves over the course of a single year are in any way predictable.
Driving the news: Piper Sandler announced last week that it will no longer publish an S&P 500 price target.
- "Having target prices on individual stocks makes sense, but makes less sense nowadays for the index," wrote chief investment strategist Michael Kantrowitz.
Between the lines: "The market no longer represents the stocks in the market," writes a slightly exasperated Kantrowitz, who published a chart showing almost no correlation between what the S&P 500 is doing and what individual stocks are doing.
What they're saying: "Forecasts of market levels and economic conditions are typically egregiously wrong," Burton Malkiel, the author of "A Random Walk Down Wall Street" and the chief investment officer at Wealthfront, tells Axios.
- "Investment errors occur by acting on short-term forecasts."
Our thought bubble: If anybody predicted the recent trajectory of the S&P 500 correctly, they were either right for the wrong reason, or else they happened to be uncannily prescient when it came to forecasting Nvidia stock in particular.
The big picture: Over the 12-year period from 2011 through 2022, total one-year returns for the S&P 500 were either higher than the highest forecast or lower than the lowest forecast 75% of the time, per a 2023 analysis by Vanguard's Kevin DiCiurcio.
- "Meaningless and futile are the most charitable descriptions I can apply to such forecasts," he writes.
The bottom line: No one should pay any attention to one-year price forecasts for the stock market as a whole.
- If that's the case, then there's no point publishing them in the first place.
