With literally trillions of dollars at stake, investing is serious business. And for those who make their living off managing other people's money or advising them what to do with it, the stakes are even higher. And yet, when it comes to picking stocks, even the most successful, highest paid players will readily concede how often their predictions are wrong.
With this in mind, John Butters, senior earnings analyst at FactSet, set out to settle an age-old debate over who is the better predictor of the market.
"At this point in time the analysts have been more accurate over the last few months," Butters says in the attached video. "However, it's interesting to note that both the analysts and the strategists have actually underestimated the rise we've seen in the markets the last few quarters."
For example, a year ago, when the S&P 500 was at about 1330, he says analysts were targeting that we would be in the 1550 range today, while strategists were more conservative and even lower in mid-1400s.
And going forward, Butters says he has discovered ''a dichotomy in the opinions" between analysts and strategists, with the former projecting an average increase of about 10% from current levels over the next year, and the latter are not as optimistic and are predicting markets will remain fairly flat.
As for sectors, Butters says more analysts prefer the Energy sector than any other, with 60% recommending it as a buy, seconded by 55% who say the same thing about Health Care. It's a trend that he says has held for at least the last two years.
On the flip side, Utilities get the least love from analysts with just a 32% buy rating, which is lucky since they are up just 2% in 12 months, at a time when the S&P 500 has gained 22%.
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