Just how good are those so-called experts who appear regularly on the news making stock picks and predictions about the economy? BusinessWeek gave readers the opportunity to see.
Some of the most prominent business and economic media pundits were surveyed in the Dec. 25, 2006, “Where to Invest” issue of BusinessWeek – including New York Times regular Ian Shepherdson, Moody’s Economy.com economist Mark Zandi and Standard & Poor’s Chief Investment Strategist Sam Stovall.
BusinessWeek surveyed 80 investment strategists about where the stock market would be at the end of 2007, and 58 economists on where gross domestic product (GDP) would be at the end of 2007. How did their projections pan out? The Business & Media Institute took a look.
The “consensus” of the BusinessWeek survey was fairly close to target – predicting the Dow to be at 13,155, the S&P 500 to be at 1,501 and the NASDAQ at 2,647. Although no one foresaw the midsummer Dow high of 14,000 on July 19 or the year’s high of 14,164 on October 9, the year-ending slide put the markets closer to the experts’ predictions.
Tom McManus, a strategist for Bank of America Securities who appeared on NBC’s “Today” once in 2007 and was cited by USA Today five times in 2007 as an expert on the markets, was the least optimistic of media pundits, predicting the DJIA would finish the year at 12,700, up only 237 for the entire year.
Standard & Poor’s Chief Investment Strategist Sam Stovall, who has appeared on ABC “World News with Charles Gibson” five times and once on “CBS Evening News” in 2007, predicted a lower Dow finish at 13,180. In August, Stovall had a gloomy forecast – forecasting a recession after the Dow dropped 3 percent.
CNBC “Mad Money” host Jim Cramer was more optimistic about 2007 last December, although he didn’t maintain his optimism after his late-summer “Armageddon” tantrum. Still, Cramer predicted the DJIA would finish up for the year at 13,500.
Jack Ablin, a strategist for Harris Private Bank, who was cited in 2007 by USA Today 16 times, was the closest – predicting the Dow would close at 13,300.
Although fourth-quarter GDP numbers for 2007 won’t be released until March, none of the economists surveyed by BusinessWeek came close to predicting the erratic GDP growth numbers of 2007 – 0.6 percent in the first quarter, 3.8 percent in the second quarter and 4.9 percent in the third quarter (3.1-percent average for the first three quarters).
Ian Shepherdson, chief United States economist with High Frequency Economics and a regular “doom-and-gloomer,” was the least optimistic of media regulars. He predicted zero economic growth in the first two quarters of 2007 and 2 percent growth in the third quarter. Shepherdson is a favorite of The New York Times, cited 11 times in 2007. He was also cited by USA Today 10 times in 2007.
Network news regular and Moody’s Economy.com economist Mark Zandi predicted GDP at 2.5 percent in the first quarter, 2.9 percent in the second quarter and 3 percent in the third quarter (an average of 2.8 percent) – a prediction just slightly lower than what happened. Zandi appeared on CBS 20 times, NBC seven times and ABC five times in 2007. Zandi has been pessimistically outspoken on the housing market – predicting the end to the housing downturn might not happen until June 2009.
Another network regular, Diane Swonk of Mesirow Financial, predicted stable GDP numbers for 2007 – 2.4 percent in the first quarter, 3.1 percent in the second and 3.2 percent in the third (an average of 2.9 percent). Swonk appeared on NBC four times and both CBS and ABC twice in 2007.
Only Shepherdson came close to getting the first quarter correctly – predicting zero growth in the first quarter. James Paulsen, an economist for Wells Capital Management, was the closest to getting the second quarter correct. Paulsen was cited by The New York Times six times in 2007. No one came close to calling the robust third-quarter GDP number of 4.9 percent. Even the most optimistic about the third quarter of 2007, Donald Straszheim of Roth Capital, only predicted 4 percent GDP growth. Straszheim was cited by USA Today four times in 2007.