By Shawn Langlois, MarketWatch
Donald Trump winning the presidential election in November 2016 and the ensuing “Trump bump” in the market set the stage for one shocker after another in 2017: a historic lack of volatility, resurgence of the FAANGs, a rally in Mexico stocks, and, of course, the mother of all eye-poppers — bitcoin’s surge.
In MarketWatch’s “Need to Know” column, we highlight a daily selection of the more notable market predictions from the Wall Street professionals on down to the armchair investors. (<INTERNAL-PAGE URL="/user/newsletter">Sign up to get Need to Know delivered to your email box here.</INTERNAL-PAGE> Be sure to check the Need to Know item.)
Some absolutely nail it, while others whiff badly.
Time for taking ownership. Let’s take a look at a few of the hits, misses and TBDs we covered over the course of an unpredictable 2017.
Ron Paul’s bear call
Accuracy rating: 1/10
Maybe Ron Paul should stick with... well, something other than market predictions. The multiple campaigner for president made headlines this summer with his forecast that stocks, plagued by an overrated recovery for the U.S. economy, could plunge 25% by October. He even upped his call by late August for a 50% pullback.
“If the market crashes tomorrow and we have a great depression, [Trump] didn’t do it in six months,” Paul said at the time. “It took more like six or 10 years to cause all these problems.” With the year winding down, this was clearly one shocker of a bad call from Paul, considering the Dow’s (DOW:DJIA) push above 24,000.
FAANGs are just playing dead
Accuracy rating: 9/10
Barron’s wrote a story midyear about how Netflix (NAS:NFLX) , Apple (NAS:AAPL) , Google (NAS:GOOGL) and the rest of the FAANG bunch were merely playing dead and that a nice recovery was right around the corner. At the time, these market drivers had just taken a big hit after leading the Nasdaq Composite (NASDAQ:COMP) to record highs earlier in the month. The sudden decline had many screaming “the bubble’s finally popping!” But not Barron’s. The pause was, indeed, temporary, and the group quickly went back to its winning ways and pushing the broader market to new heights.
“We might not like that these companies have gotten so big and so dominant, but they are reaching global audiences in ways that we’ve never seen any company do,” Dan Chung, CEO of asset manager Alger, told Barron’s.
The VIX at 1,000?
Accuracy rating: 1/10
This one may eventually turn out right, but wow, it couldn’t be more wrong so far, considering how incredibly quiet markets have been. Early in the year, the EconMatters blog said the VIX (845:VIX) , known as Wall Street’s “fear gauge,” could potentially topple the 1,000-point level. “The central banks have no clue to what degree they have distorted financial asset prices,” the blogger wrote. “We are facing the massive unilateral complete global financial default that only the tin foil hat crowd has envisioned.” This was a bold call, no doubt, considering the index has never even topped 100. The VIX is actually LOWER than when this call came out. So... not even a passing grade on this one. Yet.
Accuracy rating: 7/10
We first mentioned John McAfee’s love for bitcoin (COINDESK:BTCUSD) back when the crypto was closing in on $3,000. At the time, the cybersecurity legend said bitcoin was showing some enormous momentum and had plenty of upside. Then, in July, he took it up several notches and said bitcoin would hit $500,000 within three years or he’d eat a NSFW piece of himself. McAfee upped the ante a few months later, and even after a volatile Christmas weekend for bitcoin, he double-downed on the $1 million by 2020 call . It’s hard to give him too much credit for these calls, and they still seem pretty outlandish. But his original call from back in May -- “Bitcoin has enormous momentum” -- certainly hit the mark.
Look east for outperformance
Accuracy rating: 6/10
After the initial “Trump bump,” there were many fearing a pullback. With that in mind, DoubleLine Capital’s “Bond King” Jeffrey Gundlach said to look to Japan. Specifically, he said to consider the WisdomTree Japan Hedged Equity Fund (PSE:DXJ) to gain exposure to the country’s growth. Since then, the fund has rallied more than 19%, so he gets good marks for that solid return. Then again, it’s not exactly trouncing the S&P 500’s performance (S&P:SPX) , so it’s not quite the better option he made it out to be. Still, a win’s a win.
Viva la Mexico!
Accuracy rating: 7/10
Steven Jon Kaplan of the True Contrarian blog was feeling bullish on Mexico due to his belief that the media hype about Trump ruining the country weighed irrationally on the market. So he said to buy the iShares Mexico ETF (PSE:EWW) . “As a useful rule of thumb, when deciding between investing in various countries, favor those with the most illogically oversold currencies, because those will consistently produce the greatest profit increases under most circumstances,” Kaplan said. “That is especially true if the country has a long-term track record, as Mexico does, of outperforming most other global markets in recent decades.”
Shortly after his call earlier in the year, that ETF outperformed for the better part of the year. Recently, however, it’s lost ground and now lags the broader U.S. market. Still, Kaplan is up about 20% since his purchase, so he deserves some credit.
Alibaba vs. FAANG
Accuracy rating: 9/10
The FAANGs were having a relatively weak stretch during the late summer when TipRanks offered up a high-tech alternative: China’s Alibaba (NYS:BABA) . The reason: Hedge-fund notables, led by the likes of David Tepper and Daniel Loeb, were loading up. While FAANGs went on to notch some nice gains, they didn’t keep up with Alibaba, which almost doubled from that point.
Time for gold to shine?
Accuracy rating: 2/10
Gold got a boost as a safe-haven option back in August, when a missile launch from North Korea over Japan and Hurricane Harvey’s mounting toll had investors feeling jittery about the state of things. Trader Petros Steriotis predicted the spike in demand would help carry gold up to $1,375. There was a short-lived rally after his call, but gold never got to that level. And since then, it’s suffered a steady drop to where it sits now at around $1,310.
Commodities rally, 2.0?
Accuracy rating: 5/10
Canaccord Genuity strategist Martin Roberge pointed to imminent rate hikes by the Bank of Canada in the middle of the summer as a trigger for a rally in commodities stocks. “While Commodity Rally 1.0 in 2016 was driven by US$ depreciation, we believe Commodity Rally 2.0 will be more fundamentally ‘demand’ driven,” he wrote. Roberge said investors should overweight their portfolios with energy (PSE:XLE) , materials (PSE:XLB) and industrials (PSE:XLI) . Meh. Investors would have fared OK if they had listened to his advice, but they would have slightly lagged the S&P.
Amazon $1 trillion
Accuracy rating: 7/10
This one still has a ways to go, but Scott Galloway’s “Amazon $1 trillion” is well on its way. The NYU professor says the Seattle giant will become the first-ever company to reach that market cap. He says Amazon (NAS:AMZN) declared war on conventional brands, changed the relationship between a company and its shareholders, and deployed Alexa (its voice service/digital assistant) in clever ways.
“Alexa and Amazon have conspired and figured out that voice is a way to pull brand and some of the traditional mechanisms and accoutrements of brand-building out of the ecosystem, and then slowly but surely take control of your preferences,” Galloway said. Amazon’s market cap currently sits at $563 billion, having added more than half its value since the beginning of the year.
A bet on Nvidia is a bet on AI
Accuracy rating: 10/10
This one was a clear home run. Jefferies analysts told investors looking to make money on the artificial intelligence trend to bet on hot chip-stock Nvidia (NAS:NVDA) . The shares were already up nicely for the year when they made this call, and are up 80% since the end of March. “Artificial intelligence and deep learning will be among the most important investment themes in the next 3-5 years,” Jefferies said, pointing to Nvidia as the de facto standard in AI.
Accuracy rating: 4/10
In the fall, Greg Guenthner of the Daily Reckoning blog said small-caps were set for a fourth-quarter surge. This “trader’s paradise” is just warming up, he predicted. “The market’s changing before our eyes. Most investors will be caught off-guard. Don’t be one of them,” he wrote. “Pay attention to the signs of market rotation, and you’ll continue to rake in consistent gains as the market preps for a potential fourth-quarter melt up.” While the Russell 2000 (USA:RUT) is up since his call, there’s hardly been a “melt-up” to this point. Perhaps he was a little early.
Which calls are going to win out in 2018? Sign up for our Need to Know column to stay on top of the big calls, charts and quotes of the day -- and what it means for your money.