I suspect even the casual follower of market news has seen an article with some set of 2012 predictions on the economy, stock market, best and worst investments, etc.   Maybe you’ve taken the time to read one or two.  Maybe not.  Either way, they are all largely the same (and equally useless).

They typically start by recapping the events that prevented their 2011 predictions from coming to fruition.  Middle East riots, Japan’s earthquake/tsunami, S&P downgrading long-term U.S. debt, Europe’s sovereign debt crisis escalating, and central bank intervention are all commonly cited in the “excuse-making” section.  The truth is their forecasts are wrong every year, but they sell newspapers and increase TV viewers so it doesn’t really matter to them.

Then the forecasting begins.  Everyone agrees that markets will remain volatile, but most say the stock market will make modest gains in the upcoming year, which is typically the case every year unless the economy is currently in recession – this phenomenon is the result of cognitive behavioral biases that cause analysts to extrapolate recent experiences into the future.

Finally you get to the trends to watch in the year head.  The most popular themes for 2012 are the eurozone’s debt crisis and the U.S. elections.  Of course, it is the unexpected events that will have the biggest impact.

I went back and read Outlook 2011 in the 12/20/2010 issue of Barron’s, which featured ten strategists from well-respected firms (Goldman Sachs, Morgan Stanley, B of A Merrill Lynch, UBS, JP Morgan, Oppenheimer, Credit Suisse, Putnam, Wells Capital Mgmt).  Here are some highlights from the so-called experts:

* The majority predicted that 2011 would bring a sustainable economic recovery. The economic recovery remains intact, although there were doubts throughout the year.  Given the continued need for Fed support, it’s hard to say view this prediction as a good one.

* Nine of the ten strategists expected the S&P 500 to make gains in 2011 ranging from 7% to 17%. The S&P 500 ended the year with a 0.0032% loss.

* Most expected stocks to outperform bonds, especially Treasuries. Ouch, Treasuries returned roughly 15% this year.

* The average forecast of U.S. economic growth was 3.2%. We don’t have the final numbers yet, but economic growth for 2011 will actually be somewhere between 1.5%-1.7%.

* Technology was the top sector pick by eight strategists and none held it in a negative view. Technology (+2.43%) was the third-worst performer out of ten.

* Utilities and Healthcare were the least favorite sectors. Utilities (+19.96) was the best performing sector and Healthcare (+12.73%) was the third-best.

As you can see, you aren’t going to get rich following the advice you read in the papers or see on the news.  Instead, you build wealth by focusing on the things that can be controlled.  About a year ago, I wrote an article on this topic and the advice is still relevant.

I have a reader request to write about bond basics, so that will be the topic next week.  Thanks for reading.

Peter Lazaroff

St. Louis, MO

www.acrinv.com