Executive Summary

  1. Retail investors were down over 35% on average in 2022 as they chased into overvalued and speculative assets that did well in prior periods.
  2. 2022 was generally difficult for even conservative and balanced portfolios.
  3. Wall Street insists on performing the fool’s errand of making12-month return forecasts and got it very wrong in 2022.
  4. 12-year outlook for stocks and bonds.

Retail Investors

Retail investors fared very poorly in 2022 as they chased performance in overvalued “fads.”

Vanda Research has indicated that the average retail investor lost over 35% in 2022, which is much worse than even the broad stock market. Very aggressive (100% stock) portfolios should have only lost around 20%. However, retail investors have a tendency to speculate, fall for fads and buy the strong performers of prior periods near the end of the performance cycle.

This is why it is so important to:

  1. Develop an investment strategy that is expertly informed by robust financial projections and stress-testing. In other words, determine your financial capacity for risk.
  2. Remain committed to your informed investment strategy through all the distracting noise and inevitable manias and panics even as friends are bragging about their returns on “hot stocks” during the mania.
  3. Understand that an asset’s value is ultimately a reflection of the very long stream of cash flows it will provide. This means that to make sound investment decisions you must perform a sound, long-term analysis otherwise it’s just speculating/gambling.
  4. Ignore those that claim “this time is different” when something seems to violate all the norms of history and time-tested principles.
  5. Maintain globally diversified portfolios including non-correlated assets.

Wall Street Does it Again

In the past, I’ve shared a chart that shows Wall Street 12-month return forecasts with actual 12-month returns indicating a poor track record.

Forecasting 1-year stock returns is a fool’s errand…a complete waste of time. Nobody can predict 1-year returns with any consistency or reliability.

Well, 2022 was no exception. Listed below are some of the top banks’ forecasts for the S&P 500 in 2022.

Oppenheimer 5330
BMO 5300
DB 5250
CS 5200
GS 5100
JPM 5050
RBC 5050
Citi 4900
UBS 4850
Cantor 4800
Barclays 4800
Wells 4715
Bofa 4600
MS 4400

The S&P 500 ended 2022 at 3,840. Yet, Wall Street is at it again with their 2023 forecasts.

Below are the returns for the three asset classes that make up the vast majority of Americans’ wealth. Obviously, a rough year across the board with the three major asset classes losing between 16% and 26% on the year.


The scatterplot below shows what a historically poor year 2022 was for diversified bond/stock portfolios. It’s a helpful chart that really puts 2022 into perspective. Stock returns plotted on the x-axis (horizontal) with bond returns on the y-axis (vertical).



12-Year Return Outlook

Above I mentioned that 12-month returns are unpredictable. This is because short-term returns are heavily determined by emotions, speculators and investors’ appetite (or lack thereof) for risk.

However, 10-12 year returns are much more predictable because they’re ultimately driven by fundamentals and factors that get smoothed out over time. In fact, we have valuation metrics with 90%+ correlation to future 10- and 12-year returns so we can typically get well within the ballpark over those more meaningful time horizons.

As famed investor, Benjamin Graham, said, “In the short run the market is a voting machine, but in the long run it is a weighing machine.”

Below is a matrix of potential returns under various sales growth, profit margins and multiple scenarios. We notice that stock market returns will likely be much lower than historical averages due to the current valuation extremes that exist in the market today. The 12-year expected return based on this analysis is about 1.4% whereas the long-term average is about 10%.

This outlook is important to understand for both portfolio construction purposes AND financial planning purposes.


Treasury bonds return whatever their current yield is so a 10-year treasury yielding 3.8% will provide a 3.8% annual return if held to maturity. Short-term treasuries (0-3 years) are yielding even more at 4.2% to 4.8%!




Past performance is no guarantee of future results. All investments maintain risk of loss in addition to gain.

Data from third-parties is believed to be reliable but accuracy is not guaranteed. Much of the data used to interpret the markets and forecast returns are often at odds with each other and can result in different conclusions. Many different factors impact prices including factors not mentioned here.

This is not investment advice but merely a general commentary. Individualized investment advice cannot be provided until a thorough review of your unique circumstances and financial goals is completed.

Views provided here are current only as of the moment of posting and are subject to change at any time without notification.

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