Can Warren Buffett Forecast the Stock Market?

John Rekenthaler tests out Buffett's formula that stock market returns can be predicted by adding GDP growth, inflation and dividends together

John Rekenthaler 20 November, 2020 | 9:47AM

Warren Buffett holding cards

To answer this article's rhetorical question: Mr. Buffett can indeed predict the future of the stock market, just as Glendower can call spirits from the vasty deep in Shakespeare's Henry V. However, Hotspur’s response to Glendower remains salient: “Why, so can I, or so can any man. But will they come when you do call for them?” 

The spirits certainly will not materialise if summoned to forecast the stock market’s medium-term changes. That mission cannot be accomplished. Traders sometimes can exploit immediate movements in an individual security’s price, especially through high-frequency techniques, but they cannot consistently foresee what will happen to the entire market over the next several months.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Berkshire Hathaway Inc Class A347,401.00 USD-0.85
Berkshire Hathaway Inc Class B231.55 USD-0.68

About Author

John Rekenthaler

John Rekenthaler  John Rekenthaler is vice president of research for Morningstar.

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