The Myth of Predicting the Stock Market: Why Expert Predictions Often Miss the Mark
Introduction
The time of year has come when the brightest active fund managers unveil their predictions for the stock market’s performance in 2025. Despite their expertise and well-reasoned forecasts, I will show you why these predictions often fall short. By examining past predictions for 2024 against actual outcomes, I’ll reveal why relying on such forecasts can be a risky investing strategy. Fortunately, there is an alternative strategy that does not depend on predicting the future.
About Us
If you’re new here, welcome! I’m Dr. Tommy Perkins, an investor for 14 years. Together with my colleague Ed, a chartered accountant and tax advisor, we started Medics’ Money to guide healthcare professionals toward more informed financial decisions.
The Importance of Expert Predictions
Active investors pay experts to manage their money, believing these experts can foresee future market trends. On the other hand, passive investors understand that predicting the future is inherently unreliable and instead diversify their investments to minimise risk.
The Evidence from 2024
To understand why reliance on expert predictions can be problematic, let’s revisit 2024. The S&P 500—a key index representing 500 major American companies—closed the year at 5,928. Yet, experts like J.P. Morgan had forecast just 4,200. Their prediction cited high equity valuations, elevated geopolitical risks, and potential recessions as factors for their low forecast—proving significantly inaccurate. Similarly, Morgan Stanley foresaw a flat market, with their prediction of 4,500, advising investments in defensive growth stocks—a prediction that missed the mark. Even Bank of America’s prediction of 5,000 was incorrect, although closer than others.
The Cost of Active Management
Investors pay substantial fees for actively managed funds—ensuring managers get paid regardless of performance. Our MedicsMoney Financial Wellbeing course uncovers the potential costs: investing £200 per month for 40 years, a passive strategy might leave you with £383,393 with no fees. However, a 2% fee from an active manager would reduce this to £102,000.
Evidence-Based Investing
An alternative is evidence-based investing. The SPIVA scorecard highlights the performance gap, revealing that 76% of expert-managed funds underperformed against passive ones. With extended time frames, this figure jumps to 85% over five years and 90% over ten years. This makes predictive strategies less attractive when long-term evidence favours passive investing.
Conclusion: What’s Your Strategy?
So, what about 2025? I confess, I cannot predict the future. My own strategy involves a single low-cost passive fund, adjusted only for teaching purposes at MedicsMoney. Does your strategy depend on forecasting future trends? Are you adopting a passive approach? I welcome you to share your thoughts in the comments. For more insights, check out our previous video “How Much I Made From Investing Last Year.” Don’t forget to hit like and subscribe to stay updated. Thank you for reading!
