Are market seers worth their salt? When forecasters are considered as a group, the answer is no.
That's the conclusion one draws from a study by CXO Advisory Group, a Manassas, Va., provider of market research and analysis. CXO, which recently completed an eight-year examination of gurus' market calls, found that on average the prognosticators were right 47% of the time—slightly worse than pure chance. Steve LeCompte, CXO's founder, gathered the 6,584 individual forecasts single-handedly. To simplify the process, he considered only calls about the performance or direction of U.S. stocks.
LeCompte also graded individual pundits. At the top of the list is David Nassar, an author of how-to books on day trading, who scored 68% accuracy. However, Nassar's grade is based just on an 18-month period between 2004 and 2006, when he wrote a column for MarketWatch.com (gurus were graded over different periods based on when each was active). In second place, with a 67% accuracy rate, is Jack Schannep, who publishes TheDowTheory.com. He is a technical analyst, which means he forecasts market movements by studying charts and patterns. Ken Fisher, a money manager and Forbes columnist, comes in third, with a 65% score. Fisher earned points for correctly advising investors to steer clear of stocks during the worst of the 2000–02 bear market, but he lost points for being overly bullish in 2008.
Big-name gurus are scattered throughout the rankings. Mad Money host Jim Cramer posted a 47% accuracy rate (LeCompte focused on Cramer's written calls by tracking a column he used to write for New York magazine). Bob Doll, chief stock strategist for Nuveen Asset Management, beat the average with 55% accuracy. Abby Joseph Cohen, a well-known strategist for Goldman Sachs, managed only 35% accuracy based on her calls from 1998 to 2011. At the bottom of the list is Robert Pretcher, a proponent of the so-called Elliott-wave theory of technical analysis, who got it right just 22% of the time. (Read the full report.)