Probabilities and Consequences of Further Declines

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For the first time in decades, Wall Street strategists are collectively pessimistic about the stock market over the coming year, according to Bloomberg. Prior to the dot-com and financial crisis collapses (2000, 2001, 2002 and 2008), Wall Street strategists predicted stock gains for the following year. Predictions of gloom are indeed rare.


Does this mean those strategists are super bad at prognostication and this is a contrarian indicator (time to buy)? Or is this a good reason for investors to position portfolios cautiously? By framing the question in terms of probabilities and consequences, investors can get a clearer path.

Over the past year, my firm conducted surveys with investors and advisors that addressed market bubbles and bear markets. The results of these surveys unearthed some fascinating findings: