Price Targets for 2025
Here are some key takeaways:
– The S&P 500 finished 2024 at 5881, up 25%, significantly outperforming analysts’ price targets
– These price targets are often viewed as not very useful, as they tend to cluster around historical averages
– Since 1950, the S&P 500 has only finished within 2% of its long-term average 5 times
– Over the last year, only 23% of money managers outperformed the S&P 1500 benchmark
– Over longer periods (3, 5, and 10 years), 85-90% of fund managers under-performed their benchmarks
– For most investors, indexing and maintaining a diversified, low-cost portfolio is likely to be more successful than stock picking
– It’s important to separate reading and understanding market reports from making investment decisions based on them
Price Targets for 2025 – Links
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Price Targets for 2025 – Transcript
All right, the gang is all here. We’re back recording another video for you here, and we’re in early 2025, so it always happens this time of year. I think it’s fun and a good exercise to look back on what happened in 2024. It’s especially fun to look at the predictions and the year-end price targets for the S&P 500 that came out at the end of 2023, so it was people’s predictions about what was going to happen in the market in 2024.
I think both 2023 and 2024 went against the consensus. It went very much against the consensus. The people that come out with these forecasts always don’t really make too wild of predictions; they like to stay around the historical returns, maybe plus or minus 5 to 8%. Most fall within that range.
So, just to walk through a couple of the known price targets for 2024. We’re getting this info from FactSet. JP Morgan’s year-end price targets for 2024 was 4200, Morgan Stanley’s price targets $4500. Wells Fargo’s was 4625.
They got very specific – I don’t know if Wells Fargo had some inside information or something, but they had a very specific number!
Yes, they were dialed in there. UBS price targets 4700, Bank of America 5000, Citigroup price targets 5100, Deutsche Bank 5100, Goldman Sachs 5100.
There was a point in time in November where the S&P was trading over 6000.
We finished up the year at 5881, or up 25%. And these are from some of the most well-known names in our industry.
What are your guys’ thoughts on this and how useful are these predictions? A lot of them have just come out for 2025.
How useful is this stuff?
It’s stuff that’s almost performative, I think. We know that the information isn’t that useful; strategists have to do it – because we all want to hear it, and it just goes round and round. We ask them for this information, so they give it to us, and if they give us something that’s based on historical averages. It’s funny when you look at the average return that the markets give over time. If you look at the actual number of years that have been close or relatively close to the average, it’s not that many.
It’s a positive skew; you look at a bell curve and there are more years on the right side – because the market is usually up. It’s usually a little more than the average because the above-average years get weighed out by the handful of years where the market’s down a bunch, like 2022, you know what I mean?
And I think that choosing the average acknowledges that you’re not capable of making a more specific better prediction. But it’s almost certain to be wrong, and I think that’s what everybody should expect – based on what we’ve seen over time.
And to wit, there were several names on this list at the end of ’21 projecting where the S&P 500 would end 2022 at that had a “5” or 5000 number on the S&P 500.
The S&P went down almost 20% in 2022. It was down, I think, 18%.
Yeah, Bran, to your point, I think back, I think it was Ryan Detrik who put out the stats dating back to 1950. I believe it was 5 times that the S&P had finished the year within plus or minus 2% of the long-term average.
So, just 5 times in almost 75 years.
These firms are not going to stick their necks out and take a risk. They’re just not going to do that. And so they’re all going to fall in that same, like you said Casey, up 5-6, 8%.
If we’re forcing them to do this exercise that we all know is futile, then I think it’s more responsible for them to not take a risk, because if people are going to see this information, I would rather them just base it on a few percentage points around the long-term averages – than say some insane thing and just hope that they’re right.
People that do that are just broken clocks. And every once in a while somebody nails it and they’re super bullish or bearish and they happen to get it right.
And that’s great for them, but that’s not a responsible thing to do if people are paying attention to you. I’d prefer them to do the averages, even though we expect that’s probably going to be wrong, because, as Casey said, we hardly get something that’s close to the average return.
When you get right down to it, we’re talking about people who are trying to predict the future. Now, fortunately, in our line of work, we DO have long-term averages that we can stick with, but predicting what the market’s going to do over the next 12 months is impossible.
Yes, and I think the upside of making an out-of-the-box call is you get it right. Then you open up a fund and you get a whole slew of assets coming into your fund.
And then you ring the cash register.
You try and recreate the magic and over the long term, we know that’s really tough to do.
And then maybe you write a book about it and go on CNBC every couple of months.
So just to share the most recent numbers, I think to that point. We look at how money managers or fund managers compare to the indexes that they benchmark themselves against. This is another measure of basically active versus passive.
Over the last year, 23% of money managers have outperformed the S&P 1500, so that is the large-cap 500, the mid-cap, and the small cap – all in there.
So, 23% outperformed over the last year, so 77% underperformed.
Over the last 3 years, 9.9% outperformed the S&P 1500, so 90% underperformed.
Over the last five years, that number is 85% of fund managers underperformed the S&P 1500.
Over the last 10 years, it goes to 90% of fund managers underperforming the benchmark that they set themselves against.
Basically saying the same thing here as the price targets. A little bit different, but the money managers, they have that career risk, they have to be different than the benchmarks, because that is how these funds get assets.
What do these numbers say to you guys?
It’s very hard to pick stocks.
Yes, base rates would suggest that you not do it, but I don’t think that’ll ever stop. The information is out there, stats have been out there for a long time, and those who want to have a more active approach because of anecdote – or not being able to accurately measure performance – or just not caring and wanting to do it for entertainment purposes, like, it’s just an element of market set.
It’s probably never going to go away.
I think that for the vast majority of people, unless they’re getting some kind of enjoyment out of the activity, they’re probably better off indexing and not worrying about trying to beat the market. Because you certainly don’t need that (beating the index) to accomplish your goals.
You can get good long-term returns by indexing, keeping costs low, diversifying, just being patient and hanging out. It’s boring.
But I think that your odds of success are a lot higher than those who want to make it more difficult by trading, selecting stocks, etc.
I think that’s something else to be underscored in what Brendan just said is that when you see these graphs of these long-term price appreciation charts going up and to the right – what a lot of people overlook is a “down 20% year,” even a “down 40% year,” they are in there.
They’re already in there.
That’s with those returns baked into the cake! And yeah, there’s going to be years where the market doesn’t do what everybody, anybody wants it to do.
It’s all in there.
Yeah, it is, and I think these numbers that I pulled were compiled by Bob Seawright, who writes the Better Letter newsletter. He does great stuff, he’s in our inboxes once a week. He also shared some other interesting predictions, non-market related, that were pretty funny towards the end of it.
Two of my favorites were that the MLB player Tucupita Marcano was permanently banned from baseball in 2024 for betting on hundreds of games – many in which he participated.
He lost 95% of those bets.
Oh. Wow!
And then another one. An expert was on MLB Network before a game between the Marlins and the Yankees, and he was quoted as saying, “Don’t take this the wrong way, but we’re already on no-hitter alert with Yoshinobu Yamamoto, before he throws a single pitch tonight against the Marlins.”
Of course, Miami’s Jazz Chisholm took Yamamoto’s first pitch of the game deep.
Wow.
Bren, I think like you, both you guys, said these guys are paid to go on TV and give opinions. It’s their job, so we can’t resent them for doing their job, but we also don’t need to listen to the information for anything more than just entertainment or food for thought.
I think you can read a lot of these reports that strategists’ price targets are usually contained within about the S&P 500, and you can learn a lot about what expectations are for next year.
However, the caveat is the information contained within is going to be the stuff that we already know about. And usually the catalyst for the market moving one way or the other – up or down in a significant way – is an unknown thing coming to the forefront.
Like we talked about people’s price targets at the end of ’21 headed into ’22, and not a lot of people had “war in Ukraine” and “runaway inflation” as part of the report. Going back to 2020, like how many 2019 price targets were factoring in a pandemic?
Yeah, I would say none in that case, and basically none when we’re talking about the ’21 for ’22 estimates as well. So if those are the things that are going to move the market, then you’re not going to see those in the report because nobody knows about them ahead of time.
It doesn’t mean the information is useless. You can read it, be entertained, learn some stuff. I don’t know if you change your portfolio as a result of it. That’s where you draw the line, I think. I think it’s important to have that barrier between reading, understanding the material, the reports, and then making decisions based on that.
That’s where you get into trouble, so that’s what we try and stop folks from doing.
Did he really say Yamamoto was on a no-hitter alert? That’s insane.
And to be fair, Mr. Tucupita was on my fantasy team for a short while.
I’ve never heard of him before.
He was with the Pirates for a while. He did bounce around, but he was one of those up-and-coming minor league players. I guess he had some inside intel.
All right, onward.
