Caveat emptor, quantified

January 2, 2015

Wednesday’s Data Dive made a glancing reference to an interesting, if not entirely unsurprising, pair of statistics from investment-tracking app SigFig. An analysis of over 300,000 everyday, individual investors who used to track their holdings found that just 16 percent did as well or better than the S&P 500 for a one year period ending November 14, but in a survey of 400 randomly-selected investors, 91 percent thought they would do as well or better than the market in 2015.

As this Reuters graphic shows, the S&P was up better than 10 percent at year’s end, but overall, the performances of equities, bonds, commodities and currencies were a mixed bag. Now juxtapose that fact with this graphic of results from a Reuters poll in which the aggregated forecasts of roughly 250 analysts predicted that the 2015 year-end finishes for 17 global equities markets will all end in positive territory.

Comparing individual investors and market indices is obviously apples and oranges, but the insistent optimism is the same. America’s rebounding consumer confidence is a good thing, but we do, in fact, gravitate toward irrational exuberance, and seem all too willing to forget our past, no matter how recent. The late-2000s housing collapse came roughly seven years after the dotcom bubble; there’s always another seemingly viable angle, especially for the eager-eyed. Without a tempered sense of ambition, trouble is always around the corner, as has been the case for centuries.




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