This One Chart Shows Why Predicting Stock Market Moves Is Ridiculously Hard

Every stock market forecast ultimately comes down to two things: earnings and the valuation at which investors are willing to pay for them . For the most part, strategists were spot on with their earnings forecasts. According to Bloomberg, strategists began the year looking for $107 in earnings for the S&P. A year later, the S&P is on track to earn $110. That’s a tiny margin of error. So, it’s pretty clear: everyone got the valuation wrong. The chart to the right represents a decomposition of what drives total stock market returns. As you can see, earnings growth looks stable relative to the wild swings in valuation. moved here
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