Making correct financial predictions is tough.
That was apparent in Barron’s 2021 forecasting challenge. Our winner got a score of 11 in the contest, which featured 14 multiple-choice questions and two questions about the best and worst stock in the Dow Jones Industrial Average.
The maximum possible score was 17. The Dow’s biggest winner and loser were worth two points each, and we discarded a question about Covid because none of the three possible scenarios that we offered actually panned out. The average score was 3.74, and I got a score of four.
We received more than 5,000 entries. The winning score in the prior year (with the same number of questions) was 15, one of the best scores ever. In the 20 years of the contest, nobody has achieved perfection.
We normally profile the winner, but this year’s top scorer didn’t respond to our emails. If he or she materializes, the winner will get a two-year subscription to Barron’s and lunch with a Barron’s staffer of the winner’s choice in Manhattan once the pandemic subsides.
The toughest question was to predict the best Dow stock for 2021—it was Home Depot—which less than 1% got right. Under 2% correctly forecast the worst, Walt Disney. And less than 5% of respondents guessed that the index would return over 20% (including dividends). In fact, the Dow returned just under 21%.
Here are the correct answers—and the percentage of respondents who answered each question correctly.
1. What will the Dow Jones Industrial Average return in 2021, including dividends?
D. Above 20%
2. What will be the year’s biggest financial surprise?”
A. The S&P 500 index gains another 15%,
C. Oil prices rally, with crude finishing above $60 a barrel (West Texas intermediate crude now is around $45).”
3. Which S&P 500 sector will fare best in 2021?
4. Where will Bitcoin end? It’s now around $23,000.
D. Above $30,000
5. Which FAANG stock will fare best in 2021?
6. Which hot 2020 IPO will fare worst in 2021?
B. Palantir Technologies
7. Which losing stock from 2020 will do best in 2021?
B. Exxon Mobil
8. What course will the pandemic take in the U.S.?”
No answer we provided was correct, so we discarded this question.
9. What will happen in Washington, D.C.?
E. None of the above
10. What will be the hottest IPO of 2021 (measured by performance from IPO price)?
A. Coinbase (Bitcoin dealer)
11. Name the top stock in the Dow Jones Industrial Average in 2021 (including dividends). Worth two points.
12. Name the worst stock in the Dow Jones Industrial Average in 2021 (including dividends). Worth two points.
13. Which asset class will generate the best returns in 2021?
14. Which company will agree to be taken over in 2021?
F. All will remain independent.
15. Which winning stock from 2020 will do best in 2021?
16. Which CEO will no longer be at the helm at the end of 2021?
D. Intel’s Bob Swan
17. Tiebreaker. At what level will the Dow Jones Industrial Average finish 2021? (It’s now around 30,000.)
We received over 3,000 responses to the 2022 quiz and will announce a winner in January 2023.
No More Santa Claus
Stocks slipped to open the week. Tuesday was Fed Day, with Chairman Jerome Powell’s confirmation hearing on Capitol Hill. Consensus settled on four rate rises in 2022, starting in March. Indexes rose even after December inflation numbers came in at 7% year over year, only to fall hard on Thursday, led by tech. Earnings season began with bank stocks taking a beating. On the week, the Dow industrials fell 0.9%, to 35,911.81; the S&P 500 slipped 0.3%, to 4662.85; and the Nasdaq Composite lost 0.3%, to 14,893.75.
The Powell Show
Powell was grilled on inflation, interest rates—and ethics. He conceded that inflation posed a “severe threat” but said supply-chain problems would ease. His testimony followed the resignation of Vice Chairman Richard Clarida, after revelations that his trading activities were greater than what he had described. Powell said new ethics rules would effectively end officials’ “ability to actively trade.” President Biden nominated former Fed governor Sarah Bloom Raskin to be vice chair for supervision.
A Shot at Mandates
The Supreme Court blocked the administration’s corporate vaccine mandate, 6-3, while allowing it for healthcare workers at facilities that accept Medicare and Medicaid. Local governments and companies can also set their own mandates. Citigroup , for instance, said it would fire anyone who refused to get vaccinated by the end of the month. The Omicron surge, meanwhile, may be peaking in the Northeast, while still rising nationally.
U.S. and Russian talks began over Ukraine, with the two sides laying out their positions: Russia demanding that Ukraine never be allowed to join NATO; the U.S. threatening sanctions if Russia invades Ukraine. Those talks were followed by Russia sitting down with NATO, insisting there were no ultimatums or time lines, but demanding “a fast response,” then declaring them at a “dead end.” The Ukraine government then got hit by a cyberattack.
Blow to Biogen
In an unusual, if preliminary, decision, the Centers for Medicare and Medicaid Services said it would only reimburse patients for Biogen’s Alzheimer’s therapy, Aduhelm, who were in clinical trials. Doubts have been raised about the drug’s efficacy. Shares fell 5%.
Annals of Deal Making
Take-Two Interactive Software said it would acquire Zynga for $12.7 billion in cash and stock, a 64% premium. Zynga, best known for FarmVille, gives Take-Two a big presence in mobile gaming. Zynga stock had been hurt by Apple ’s change in privacy rules…Cerberus cut stakes in Deutsche Bank and Commerzbank it bought in 2017, when it looked as if the troubled German banks would merge. They never did…Citadel Securities sold a $1.2 billion stake to venture-capital firms Sequoia and Paradigm possibly in preparation for an IPO, valuing it at $22 billion…Citigroup said it would sell or IPO its Mexico retail bank, Banamex, and unloaded some Asia retail units for $3.6 billion…Private equity’s TPG went public at a $10.4 billion valuation.
Write to Andrew Bary at firstname.lastname@example.org