The 2013 Commentary Scorecard
By Jill Mislinski
February 11, 2014

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Let’s look at what prominent forecasters said in January 2013 about how the markets and economy would perform last year.

At the close of 2012 and the start of 2013, the looming “fiscal cliff” was a main topic of discussion and threw a wrench in many authors’ abilities to prophesize the behavior of the market and economy in the coming year.

We compiled and analyzed a short list of authors who made predictions for 2013 at the start of last year. We presented the data so that you can assess the accuracy of their forecasts using six benchmarks:

  1. U.S. stock market: 2013 was a very successful year for equities as it reached new highs and rose 29%. The S&P 500 closed the year at 1,848 and 2013 earnings per share was $101.72, with 66.7% of companies reporting.
  2. Interest rates (10-year Treasury): The yield on the 10-year note increased by 126 basis points.
  3. Gold: CME Group Inc.’s spot gold price fell by 28%.
  4. U.S. GDP: Real growth was 1.9%, though data for the fourth quarter is still preliminary.
  5. U.S. Inflation: Inflation growth fell to 1.5% in 2013
  6. Japan and China: The Nikkei rose by 56.7% in 2013, but the yen fell by 18%, so that was roughly a 38.7% gain for dollar-based investors. The Shanghai Composite in China lost 6.8% in 2013. China’s growth has been estimated to be 7.6% and Japan’s to be 0.9% in 2013.

This is not an exhaustive or systematic study – it is a sampling of how some predictions that were made in January of 2013 turned out.

Charles Schwab (Liz Ann Sonders)

Liz Ann Sonders discussed the looming fiscal cliff and made a few predictions in her Jan. 3, 2013, year-end commentary, Taking Care of Business, DC-Style, to Avert the Fiscal Cliff.

  • “Possibility of increased interest in stocks relative to bonds, at least in terms of fund flows. … The end result would have S&P 500 operating earnings growth approaching 9% for this year, which would be an acceleration from 2012’s 3.4%. However, it’s lower than the present 13.6% consensus for growth. As we’ve been opining for some time, risks are to the downside for 2013 earnings estimates. That said, valuation on those earnings appears reasonable at about 13 times earnings assumed with a 9% growth rate – well below the long-term average of greater than 16.”
  • “I’m assuming nominal GDP growth could be close to 5% in 2013 (2.5–3.0% real GDP plus inflation).”

Columbia Management (Colin Moore)

Moore’s 2013 International Outlook, published Jan. 18, 2013, reviewed select international and financial markets.

  •  “Although our long-term view on Japan remains bearish, there is a chance that Japanese equities will perform well this year.”
  • We don’t expect a return to the high growth rates of last decade, particularly in China, but we would argue that this will perhaps be a higher quality more sustainable type of growth moving forward, led by the rise of a powerful middle class and perhaps less fixed asset investment.”

Franklin Templeton (Michael Hasenstab)

Hasenstab rehashed 2012 while giving some perspective on 2013 in his Jan. 10, 2013, A New Year’s Vantage Point.

  • “In China, we expect a moderation of growth accompanied by a number of policy reforms that we believe could lead to sustainable levels of growth as the economy increasingly relies on rising consumption.”

GMO (Jeremy Grantham)

Grantham had little to say about these benchmark predictions in his commentary, On the Road to Zero Growth, published on Nov. 20, 2012, but he did mention an expectation for GDP. Although it was not made in January, we included this forecast because it was widely cited in the media.

  • “U.S. GDP growth rate we have become accustomed to for over a hundred years – in excess of 3% a year – is not just hiding behind temporary setbacks. It is gone forever.” His prediction was an increase of 1.4% and adjusted growth of about 0.9%.

Hussman Funds (John Hussman)

Hussman assessed conditions in the U.S. stock market in his Jan. 8 commentary, The Good Without The Awful :

  • “Valuations are still rich, but they are now in the range we’ve seen near more typical bull market highs, so I also expect a more typical frequency of bullish opportunities in the market cycles ahead. Looking over the full span of history, the return/risk estimates from our ensemble methods have been positive about 65% of the time, and would indeed have encouraged a leveraged position (unhedged, plus a few percent in call options) about 50% of the time.”
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