Wealth Matters: Forecasters Find the More Pessimistic View Is the Fashion

But I’ll give them this: in terms of macroeconomic events, this has not been an easy year to predict, starting with the earthquake in Japan and the revolutions in the Middle East. There has also been the continuing failure of European politicians to come up with a workable solution to Greece’s debt problem and, in August, Standard Poor’s downgrade of the United States credit rating.

Perhaps not surprisingly, the group this time around was unwilling to venture a guess on that staple of all market predictions: where the Standard Poor’s 500-stock index will end the year. The best I could muster from anyone was “higher” than it is now.

The group has been consistently off the mark on economic growth, lowering their expectations each quarter. Predictions of 3 to 4 percent growth in January have given way to predictions this time of half that, or less.

So given the year so far, it is remarkable that many of this group’s predictions have held true, for good and bad. Here is an assessment of the group’s calls to date and some tepid predictions on what the last quarter will bring.

GOOD CALLS The good calls have been the conservative ones.

Bill Stone, the chief investment strategist at PNC Wealth Management, has championed dividend-paying stocks all year and continues to do so. What has changed is his reason for recommending them.

At the beginning of the year, Mr. Stone said he backed these stocks because he believed that money would move from bonds into stocks and that dividend-paying ones would benefit first. As other people turned against stocks over the summer, he said that companies paying a dividend had the cash reserves to continue to pay or increase them — evidence that they were well-run.

Now, like other strategists, Mr. Stone sees dividend-paying stocks as unique survivors and one of the few securities that offer income. The average dividend yield on the S.. P 500, 2.22 percent, is now higher than the 2.08 percent yield on 10-year Treasuries for the first time since the 1950s.

“We’re sticking with the call, but when it won’t work is when we get a strong snapback,” Mr. Stone said. “When the market decides it’s not so concerned about the double-dip recession, it will drive the other stocks higher more quickly.”

The other stock picker who has stuck to his recommendations with good results is Niall J. Gannon, director of wealth management at the Gannon Group at Morgan Stanley Smith Barney. His big call at the beginning of the year was on stocks of companies that derive a substantial proportion of their revenue from outside the United States. One of his favorites is Nike, which is up 3.78 percent this year.

He said these were the only companies that were insulated from country-specific economic shocks. People may be buying fewer bottles of Coca-Cola in Greece, but they may be buying more in Brazil.

Of course, being right is not always something to gloat about. Richard Madigan, chief investment officer for J. P. Morgan’s Global Access Portfolios, has been right about something he wishes he had gotten wrong: unemployment in the United States. He predicted it would stay between 9 and 10 percent all year. While he was briefly wrong when the unemployment rate dipped to 8.9 percent in March, he is right again, and he does not like the implications of being correct.

“For markets, it’s going to be a much more aggressive campaign cycle into next year,” he said. “The political rhetoric will distract markets. It’ll be noise with a lot of policy uncertainty.”

With this bleak outlook, he is encouraging clients to stop thinking in calendar years. Trying to make up for the losses of the last two months could land people in worse straits.

CHANGED CALLS If there is one area that did not turn out as this group imagined, it was debt.

Richard Cookson, chief investment officer at Citi Private Bank, was the most brutally honest member of the group. A week before our call, he issued a report to the firm’s clients conceding that he had gotten one of his calls on long-duration bonds wrong. He titled it “Gross Miscalculation.”

Now, instead of those government bonds, he is recommending investors shift to long-dated corporate bonds.

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