How the Media Creates “Experts”

I was recently listening to a podcast hosted by a few advisors who are also popular in financial media. One of them had recently been brought on by several media outlets to talk about one of their predictions for 2023. As a way of establishing credibility, the media outlets cited one of his 2022 predictions that he got right – the S&P will have its worst year since 2008. Financial news outlets had subject lines that read something to the extent of “this analyst who forecasted market downturn in 2022, now says...” 

With an incredible degree of humility, they joked about how ridiculous it was that he was getting credit for one of his predictions while ignoring all that he had been wrong about. After all, he had 10 predictions for 2022 and six of them were wrong. Among his predictions was that the ARK Innovation Fund would outperform the Nasdaq-100 by 20%. It underperformed by 30%+.  

Instead of ignoring what they got wrong, they took this opportunity to educate their audience on how foolish it can be to make investment decisions based on what the media portrays as a market guru. They talked about how their predictions are for entertainment purposes. However, most do not have the same humility.  

The media loves to prey on the drive of people to feel like they are getting the inside scoop. The reality is that no one can accurately and consistently predict what the market is going to do. Many have been right once or twice. But if you continue to look, you’ll see they were wrong more often than not.  

Next time you see a headline like “Market guru who predicted 2008 crash predicts 2023 crash” ask a few questions. Has he made any other predictions before or since 2008? Was he correct? Are there other market gurus who predicted the 2008 crash that isn’t predicting a 2023 crash?   

Happy Planning, 

Alex

This blog post is not advice. Please read disclaimers.