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Dave Says: Don’t Try This at Home

The analysts were wrong

In Dec 2022, some of the smartest and best-paid analysts were already 100% wrong.

What began on October 13th, 2022, as a rally propelled almost exclusively by a handful of technology Mega caps, evolved into a sector-wide surge spurred by diminishing recession fears.

And the most recent surge is being led by economically sensitive stocks across the board. In fact, the Dow (as of 7/25/23) has risen for an 11th straight day and gained 5% over that period.

This marks the longest win streak since 2017 for the Dow…as in the Dow Jones INDUSTRIAL Average.

But let’s shift over to the S&P 500 index for some context.

Analyst Forecasts Were Wrong

Looking back on forecasts made by 23 analysts (chart below) in late 2022, the average price target for the S&P 500 for 2023 was 4080.

Some highlights from “2023 Outlooks” published by the most cufflinked of the Wall Street firms.


“In 1H23 we expect S&P 500 to re-test this year’s lows as the Fed overtightens into weaker fundamentals.”

  • Dave here: The S&P 500 1H23 returns came in at roughly +15%

“…pushing S&P 500 to 4,200 by year-end 2023.”

  • Dave here: The S&P 500 closed at 4555 (as of 7/24/23)

Morgan Stanley:

“Our 2023 EPS forecast for the S&P 500 of $195 is consistent with a 15% to 20% retreat from the current index price, which we expect to be followed by recovery through year-end to a level essentially flat with today.”

  • Dave here: They predicted S&P 500 at 3900 for year-end 2023. There is still time to be right, though.


See this chart for the bigger picture of where the predictions were as we headed into Jan 2023. (I made this chart from data I gathered up across media sources.)

Where the predictions were as we headed into Jan 2023.

If you became dazzled by the cufflinks and expensive shoes, listened to these analysts, and adjusted your portfolio, you likely missed one of the best starts of a year for the S&P 500 in history…something NONE of those folks predicted.

I’m not insinuating they are stupid…in fact, I hold their intellect in the highest regard. Look, and I mean this sincerely, they are good people who are forced by their firms to guess about something they have zero facts about. (Remember, there are ZERO FACTS about the FUTURE.)

I want their paychecks, not their jobs…and definitely not their suits. Ok, maybe one…for when I have to go to the Metropolitan Club in DC, where they require a suit, tie, and dress shoes just to have a drink. Facepalm – I’d hate to be their new membership coordinator.

What I’m saying is that using predictions to make portfolio decisions is not a good strategy. They are entertaining and thought-provoking, but they are NOT designed for you to act on.

A good strategy eschews predictions and relies on a solid investment portfolio buttressed by a rules-based process incorporating probabilities rather than possibilities to keep you on track.

See below. Since the sell-off began on Jan 2, 2022, the S&P 500 has about a -4.15% return as of July 25, 2023, the Equal Weight S&P ETF (RSP) return is -4.93%, and the Dow’s return is about -2.34%. Pretty close to being even.

2022 Selloff - Indices


What We Have Been Saying

If you track our advice, you know we advocate having a cash bucket and living out of that when equities are in a sell-off or downturn, so you don’t have to liquidate securities when they are down.

If you didn’t sell anything in the downturn (In other words, you stuck to the investment strategy you chose prior to Jan 2022), and lived out of your cash reserves, you are probably close to being back to even.

General Advice Going Forward

We are almost back to all-time highs, so now is the time to consider replenishing cash.

Potential Trap: You feel good about the market going up, so you start to consider waiting longer to raise the cash. That’s rife with risk – be sure to keep a level head and follow your strategy. Investors who fell for this trap in January 2022 regretted it and would have given anything to replenish cash reserves at those levels in October 2022.

Don’t have a strategy or feel like you are not getting good advice from your current advisor? Reach out. Giving people unfiltered opinions and straightforward advice is our value proposition.

Oh yeah, and we also love dogs.

Keep looking forward,


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David B. Armstrong, CFA

President & Co-Founder

Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....

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