Crazy markets are shredding Wall Street stock and bond forecasts

Another stormy week has left investors groping when it comes to the direction of stocks and bonds. Expecting to be led out of the darkness by Wall Street’s best and brightest may be asking too much, given their performance so far this year.

As usually happens in twisting markets, it is proving a brutal year to forecast for the securities industry. Back in January, stock strategists known for their enduring optimism expected the S&P 500 to add 5 per cent in 2022. Down 2.4 per cent for a sixth straight weekly decline, the index plunged as much as 19.5 per cent on Thursday from its record.

Bond strategists weren’t any more prescient. Interest rate strategists and economists were calling for 10-year Treasury rates to rise to 2 per cent by June. Yields took out that level in early February and have touched 3.2 per cent this month.

Turns are hard to capture -- that’s nothing new. This year, a collective inability to foresee the persistence of inflation is the original sin behind wrong-way calls. But such failures are hardly confined to the strategist class. Predictions on inflation levels derived from bond-market trades were wildly off. So were forecasts from economists and the Federal Reserve itself.