A recent article on CNBC had this curious title: “Majority of Street strategists see S&P rising 5% by year-end.” Why? They say that this will be driven by higher than expected earnings. In fact a majority of analysts expect that earnings will beat expectations. Well, if everyone is expecting earnings to beat expectations, doesn’t that change the expectation?

For many years, lots of investors have derived advice from predictions and theories about where the market is headed. People called “analysts” are paid to tell us where the markets or individual stocks are headed. They are paid to tell us if we should “buy” or “sell” stocks.

Here’s the thing though—analysts almost always predict the market will rise. And when you examine recommendations for individual stocks the number of “buys” significantly outweighs the number of “sells.” Why? This is caused by a crucial conflict of interest. Think about it. Analysts are employed by investment firms. Investment firms want people to think positively about the markets so they will keep investing money and the investment firm will keep making money.

The problem with these “predictions” is that when they are wrong, they can be terribly wrong. The chart below shows what the big-name firms of Wall Street predicted in 2008 and what actually happened in 2008.

So what should you do? Well, you should definitely do away with the “predictions and forecasts.” They’re often wrong. 2017 was predicted to be a mediocre year at best. It turned out to be a phenomenal year.

At Wurz Financial Services, we don’t try to predict where the market is going. We know that is foolish. Our opinions are useless. The world is way too complex for that. Instead, we use an algorithmic, rules-based process to determine how we invest and when we enter or exit the market. Want to learn more? Call us today at 888-510-2362.