Reading Tea Leaves: How Much Should You Trust Stock Market Forecasters?

2026 has started off in the usual way — with Wall Street-types reading their tea leaves and sharing their predictions on how the stock market will perform by the end of the year.

So far, the overall verdict has been decidedly upbeat. According to a Reuters poll on major brokerages, the S&P 500 is expected to rise by roughly 12% by year-end, with forecasts clustering around 7,500.

Snapshot of 2026 forecasts

Source: Reuters

If those predictions prove accurate, 2026 would mark yet another year of solid gains for US stocks — and another apparent validation of Wall Street’s forecasting prowess.

But before you get swayed by the impressive charts, complex models, and polished analysis, it’s worth asking: how often do Wall Street’s predictions actually get it right?

According to Paul Hickey, a founder of Bespoke Investment Group, not that often. Jeff Sommer, in The New York Times, discussed Hickey’s findings in a December article. Hickey, according to the Times, has found that in all the years since 2000, Wall Street has never once failed to predict annual gains. That’s even though, as of 2024, the S&P 500 has fallen in seven out of 25 calendar years, or 28% of the time. Taken together, according to the Times, Wall Street forecasts were off by an average of 14.1 percentage points annually.

With track records like those, how much trust should we really be putting in stock market forecasts?

A Key Caveat: Bullish Forecasts are Good for Business.

Hickey’s analysis shows that Wall Street’s forecasts tend to skew overly positive. There is a good reason for this (at least, it’s ‘good’ from Wall Street’s perspective).

Investors who expect markets to rise are more likely to trade, rebalance, and chase opportunities, all of which generate fees. In contrast, as Sommer pointed out, “[i]f you were being told by a confident stockbroker that the market would decline next year, you might not be eager to buy and sell stock, options and futures contracts — all of which generate profits for investment houses.”

We don’t mean to say that forecasters are acting in bad faith. Many are thoughtful analysts producing valuable economic insight. But the incentives embedded in the system make genuine forecasting extraordinarily difficult, and persistent optimism almost inevitable.

What do the Studies Say?

In a study titled ‘Do Financial Gurus Produce Reliable Forecasts?’, researchers examined over 6,500 published market forecasts from 68 prominent experts over a seven-year period. They found that the average forecast accuracy came in below 47%. That’s worse than a coin flip. Only five forecasters in the entire sample managed to exceed a 60% success rate, and even those modest successes often failed to persist over time.

Fame was also no indicator of accuracy. Well-known market commentators performed no better, on average, than their lesser-known peers. Being frequently quoted didn’t correlate with being consistently correct.

Even when forecasters were right, the study found that their predictions didn’t translate into real-world usefulness. Forecasters still routinely missed on timing or magnitude. When researchers tested whether these forecasts could be converted into profitable investment strategies, they found no consistent alpha and poor risk-adjusted results.

And what about reputable survey forecasts? In a 2023 study titled ‘How Accurate are Survey Forecasts on the Market?’, researchers analyzed three widely used survey forecasts (the Livingston Survey, the CFO Survey, and the NX survey) and found that none of them outperformed a simple random-walk forecast that predicted future returns using historical averages.

So, why are experts getting it so wrong?

Much of this comes down to overconfidence. According to the same 2023 study, the researchers found that professional forecasters would overwhelmingly issue precise point estimates rather than ranges, often accompanied by unrealistically narrow confidence ranges, even when uncertainty is objectively high.

Professional forecasters were also more likely to commit to market narratives, such as stories about growth, innovation, or macroeconomic trends, and they were less likely to abandon them in the face of new conflicting data.

Indeed, even the ‘best of the best’ can get it wrong. As Larry Swedroe, Chief Research Officer at Buckingham Wealth Partners and Financial Poise.com contributor, points out, even the Federal Reserve has been wrong before in its forecast of interest rates.

Think of Forecasts as Theater, Not Science.

Some of the most candid admissions about forecasting come from the experts themselves.

Longtime market figures Byron Wien and Laszlo Birinyi, both of whom passed away in recent years, each acknowledged that their predictions were not attempts at clairvoyance. Wien once said one of his goals was simply to “stretch people’s thinking.” Birinyi told Jeff Sommer in a 2011 interview, according to a piece he wrote for The Seattle Times, that he “just wanted to be provocative. Any prediction of his, he said, should be taken only as an ‘argument’ — one that people needed to evaluate for themselves.”

At the end of the day, no one really knows what’s in store for the future, not even experts with access to the best data. Forecasts, even from the most reputable of places, should be treated as storytelling, rather than as precise guides on how you should be investing.

You’re better off setting your investment strategy based on key principles, and not because Jim Cramer told you to (who, by the way, is so often wrong that he’s inspired investors to devise the Inverse Cramer Strategy). For more resources on investing, we encourage you to check out our Investing Basics for Beginners series.

Because fortune, as it turns out, favors the disciplined over the bold.

©2026. DailyDAC^TM, LLC d/b/a/ Financial Poise^TM. This article is subject to the disclaimers found here.

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