Are You Smarter Than a Wall Street Expert?

Money Talks News

What will home values look like a year from now? How will stocks do this year? Will gas prices be higher or lower when 2013 ends?

It’s as traditional as the ball drop in Times Square. Every “expert” crawls out of the woodwork at the start of the year to offer financial predictions, and for eight years now Money Talks News has been running an admittedly unscientific experiment: We pit Wall Street’s guesses against Main Street’s by averaging top economists’ guesses and asking random people what they think will happen. We put it all on tape, then check 12 months later to see who was closer.

It’s that time again. In the video below, Money Talks News founder Stacy Johnson takes a look back at predictions about 2012 made in late 2011. Watch and find out who was closer this year, then read on for a recap.

Watch 'Main Street vs Wall Street: Who Predicted 2012?'.

As it turns out, this year Wall Street experts were closer on two of our three categories. But that doesn’t surprise us. Neither would Main Street being closer, which is what happened last year and the year before.

Here’s the 2012 predictions and the reality….

Stocks

Pro: Up about 8 percent

Average Joe: Down 2-3 percent

Reality: Up 7.3 percent (We ask about the Dow, but the S&P was up 13.4 percent)

Winner: Pros (off by less than 1 percentage point)

Oil

Pro: $98

Joe: $120

Reality: $91.82

Winner: Pros (off by just over $6/barrel)

Housing

Pro: Down 0.2 percent

Average Joe: Up 4 percent

Reality: Up about 6 percent

Winner: Joes (off by 2 percentage points)

Maybe you’re not surprised by that result, because you think Wall Street experts will always be smarter than people on the street. Think again. When we did the same comparison for 2011, the exact opposite happened: Our man on the street was closer on both oil and housing prices – the reverse of this year.

What we’ve seen over the last decade from our “expert vs. amateur” competition is nobody is right all or even most of the time – and that includes people who earn big bucks predicting the future. Nobody predicted stocks would tumble 30 percent in 2008, or that oil would gush to $150 a barrel in 2008, just to tumble to less than $40 by February of 2009.

The bottom line is you can’t know the future bottom line. There are too many variables for anyone, no matter how many degrees they have, to make accurate predictions. Does that mean you shouldn’t listen to Wall Street experts? No – you should. But use what you hear as a basis to form your own conclusions. You’re just as likely to be correct.

Check back tomorrow for 2013 predictions, because we’re going to do it all again.

This article was originally published on MoneyTalksNews.com as 'Are You Smarter Than a Wall Street Expert?'.

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