This time of year reliably brings a flood of economic and market predictions, many delivered with great confidence and little humility.

Warren Buffett’s longtime business partner, the late Charlie Munger, had little patience for such exercises, once warning that “market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”

Years ago, a friend of mine who served as chief strategist at Russell Investments put it more bluntly, advising clients to treat forecasts less as guidance and more as entertainment.

Market forecasts from big firms and well-known strategists have generally been poor at predicting returns, especially over horizons of one-to-five years.

Studies tracking thousands of “expert” stock market calls find average accuracy just under 47% according to a CXO data set — essentially a bit worse than a random coin toss.

For annual S&P 500 returns, a 25-year review found that the consensus forecast landed within 3% of actual returns only once — and was off by double-digits in more than 70% of years.

Perhaps the biggest misses were predictions for 2008. Goldman Sachs, Citigroup, Bank of America, J.P. Morgan, Merrill Lynch and Morgan Stanley all predicted the S&P 500 would end 2008 at 1520-1675.

The S&P 500 opened in 2008 at 1,468 and ended the year at 903, one of the worst calendar year returns in modern history.

Note that the index fell further in 2009, hitting a low of 666 in March before starting a rocky upward trend and eventually closing above 1,600 on May 3, 2013.

At the beginning of 2025, the S&P 500 had hit more than 5,900, again proving that patience is rewarded.

Most market predictions are for the benchmark S&P 500, and it’s been my experience that a large percentage of forecasts tend to be around the index’s long-term historical return of about 10%.

2026 S&P 500 forecasts show Goldman Sachs at 7,600, Morgan Stanley at 7,800 and J.P. Morgan at 7,500.

More will be forthcoming, but I’m suspecting many will have similar targets.

There is a certain level of job security that comes with making forecasts that are close to consensus, and it appears few analysts are willing to go out on a limb by making big out-of-norm calls.

By contrast, Vanguard does not make short-term market forecasts like this. Given the firm’s enormous size and influence on the S&P 500, its views hold lots of weight.

Rather than making annual return predictions, Vanguard has long provided views about longer-term return ranges.

Its recently released outlook may concern some investors with an expectation that U.S. stocks will rise just 3.5% to 5.5% over the next 10 years — far below the S&P 500’s long-term 10% average annual returns.

Interestingly, Vanguard research shows the strongest risk-return profiles (in order) for high quality U.S. fixed income, U.S. value-oriented equities and non-U.S. developed markets equities.

And Vanguard notes that “heady expectations for U.S. technology stocks are unlikely to be met for at least two reasons. First is the already high earnings expectations, and second is the typical underestimation of creative destruction from new entrants into the sector.”

Whether these predictions are right or not, they are clearly very different from consensus.  

When talking about investing, Buffett said “Predicting rain doesn’t count, building the ark does.”

This philosophy emphasizes being prepared for inevitable market fluctuations rather than attempting to predict when they will occur.

Adding Vanguard’s views to the mix reminds me of the almost timeless philosophy of building a well-diversified portfolio that is consistent with your goals, time horizons and risk tolerance.

It’s been awfully easy to feel confident (“risk tolerant”) when markets are soaring like they have been lately.

But while I’m not predicting the timing of any downturn (Wall Street likes to call them “drawdowns” so they don’t sound so bad), I have always subscribed to Buffett’s idea of “building an ark” that can handle rough market seas.

For many folks, that could mean holding a portfolio with diversified exposures to stocks and bonds in a mix designed to provide the kind of returns needed to meet your financial goals and at a level of risk you can live with.

Over my many years as a financial adviser, we thought of a traditional balanced (60% stock/40% bond) strategy as a benchmark, with some clients wanting to be more aggressive or conservative than that.

Vanguard’s LifeStrategy Funds can provide at least some asset allocation guidance; its Moderate Growth Fund currently has 37% in U.S. stocks, 25% in non-U.S. stocks, 27% in U.S bonds and 11% in non-U.S. bonds.

You and/or your adviser can certainly work to construct a portfolio that meets your needs and preferences in building your own “ark.” Then you should be well-positioned to ride out the inevitable storms along your lifelong financial journey.