Since January 2008, we've now offered some 55 posts in which we've made 63 distinct predictions, mostly having to do with the stock market but also covering the direction of the U.S. economy. But are we really any good at making predictions?
Since April 2009, we've been measuring our ability to predict the future by using the plus-minus statistic from hockey and basketball, where we gain a point if we're right and lose a point if we're wrong, and score a zero for when the outcome of a prediction cannot yet be determined, or when we make multiple predictions that cancel each other out.
The cool thing about this approach is that if our predictive ability is no better than the random outcome determined by a coin toss, our plus-minus score will drift toward a value of zero over time. If we're better at making predictions than simple randomness would suggest, then our plus-minus score will grow higher in value over time. If we're wrong, then our plus-minus score will fall in value. If we're really bad, then our plus-minus score will plunge into deep negative territory!
So how did we do in the last three months since our last update?
Our plus-minus score for predictions has risen to +20! The table below details how our score rose from our previous score of +18:
| Political Calculations' Plus-Minus Score Update, 15 October 2009 | |||
|---|---|---|---|
| Date | Prediction | Outcome | +/- Score |
| 13 August 2009 | We make fun of 47 economists for predicting that the U.S. recession would end in the third quarter, based on the "Cash for Clunkers" program. We point out that the dividend futures data for the S&P 500 has been saying the recession would be over in 2009Q3 for months, long before C4C even became legislation! | Too soon to tell. This prediction looks pretty likely, but we'll have to wait for the NBER to get around to declaring the date of the end of the recession. Update: Looking more and more likely. | +0 |
| 8 September 2009 | We suggest that teen employment figures might soon begin to improve provided no further minimum wage increases are in the works. | Too soon to tell. Since the data comes out monthly, it may not be until early January (when December 2009's jobs data is released) where we'll have an answer. Update: At this writing, December 2009's jobs data indicates that teen employment figures are continuing to stabilize, or rather, have stopped their descent, which would indeed be an improvement. | +0 |
| 30 September 2009 | We come to the fork in the road for our method of forecasting the direction of the S&P 500. Option A puts the average for the index in October 2009 between 867 and 892. Option B puts the average for the index between 1089 and 1106. | Too soon to tell. Right now, it's looking like investors have chosen Option B! Update: It was indeed Option B. However, Option A was a miss, so this forked prediction nets us a big fat goose egg! | +0 |
| 8 October 2009 | We take a closer look at what we believe drove stock prices up in September 2009, finding that those forces are still at work in October. In a chart, we identify two approximate dates where the upward ride provided by our suspect source of market noise might come to an end: 15 October 2009 and 17 November 2009 (both one year after the actual indicated dates shown on the chart.) | Too soon to tell. At this writing, we would say that 17 November 2009 looks more likely, mainly because of the sustained fall-off in the year-ago 10-Year/3-Month spread in U.S. Treasuries. We'll find out within the next several days if there's anything to the large drop in the year-ago spread that we see after 15 October. Update: The market noise did indeed come to an end, as the stock prices resumed more closely following where the expected future change in the growth rate of dividends per share would place them. We also observed that stock prices began a general drop off following 15 October 2009, which lasted a month (they dipped initially on 16 October, peaked at just a point above where they were on the 15th on 17 October, then didn't revisit that level again until 16 November 2009.) We get the deuce! | +2 |
| 2 November 2009 | After reflecting upon the most dramatic confirmation yet of our model for predicting stock prices, we realized that the market was in transition regarding where investors were focusing their forward-looking attention (we weren't sure if investors were focusing on the third or fourth quarter of 2010.) So we split the difference and predicted the market would range between 936 and 1074 during the month of November. | Splitting the difference got us close to where stock prices went in November 2009, but no cigar! With an average daily closing price of 1087.66 during November 2009, the S&P 500 exceeded the upper end of our original prediction for the month by 1.3%. Fortunately for us though, we revised our original prediction for the month!... | -1 |
| 10 November 2009 | A week later, we confirm that investors shifted their focus to the fourth quarter of 2010 and adjust our prediction for the month of November accordingly - anticipating the average for the S&P 500 during the month would range between 959 and 1098. | In November 2009, the S&P 500 averaged 1087.66. Good thing we updated our outlook! | +1 |
| 1 December 2009 | We ran up to the very edge of what we can predict using our forecasting model for stock prices, as we recognized that investors were transitioning way from focusing on where the level of dividends per share would be in 2010Q4. We weren't sure if they were looking backward or forward from that point, but put forward a prediction never-the-less based upon using the data for 2010Q4, anticipating that the S&P would fall between 1032 and 1094 during December 2009. We recognized that with investors shifting their forward-looking time focus, we would likely be revising our prediction! | Good thing we revised that prediction once we figured out which point in time investors were focusing! We score this prediction as a miss, since the S&P 500 averaged 1110.38 for the month of December 2009, some 1.5% above the upper end of our forecast range. | -1 |
| 3 December 2009 | Noting that the dividend futures projected for the S&P 500 on 4 December 2009 ticked upward, and that the U.S. dollar had dipped in foreign exchanges, we anticipated that U.S. stock prices would increase on that day in a coin-toss prediction. In an update on 4 December 2009, we note that a better-than-expected jobs report would produce an short-lived, noisy, upward reaction for stock prices. | Right on both counts! As it happened, the "short-lived, noisy, upward reaction" lasted for just the morning of 4 December 2009! | +2 |
| 9 December 2009 | Seeing conflict between what dividend futures (up) and stock futures (down) were anticipating for stock prices on 9 December 2009, and recognizing that the odds really were 50-50, we bet that the dividend futures would carry the day! | Dividend futures won the kickoff and held the lead for most of the day, but ultimately, new information late in the day brought stock prices down! | -1 |
| 21 December 2009 | Using incomplete data for the month of December 2009, economy would dip in the second quarter of 2010, with a slow recovery afterward. We anticipate that meaningful growth in the number of jobs would likely begin with the third and fourth quarters of 2010. We anticipate that the NBER will declare the recession they found to have begun in December 2007 to have ended in the third quarter of 2009, but we make a case for 2010Q2 as a more realistic alternate. | Too soon to tell. It will be a while before we get a full confirmation for these predictions. On the potential plus side for us, different branches of the Federal Reserve have used their own models for predicting what the NBER will do to find that July 2009 is the month they will most likely declare to be the ending date for the recession. | +0 |
| 23 December 2009 | Again using incomplete data for the month of December 2009, we refine our prediction for December 2009 to indicate that the S&P 500 will average between 1101 and 1115, and project that January 2010 will see stock prices average between 1110 and 1123. | Stock prices averaged 1110.38 in December 2009, but clearly, when predicting where stock prices will be in the next month, we should avoid making predictions with partial-month data from the current month! This nets out as a zero for us! | +0 |
| 4 January 2010 | Using all the data through the end of December 2009, we updated our preliminary forecast for January 2010 to put the average level of the S&P 500 between 1131 and 1165. | Too soon to tell. The month's not over yet, but so far, we're on track! | +0 |
Previously on Political Calculations
- Plus-Minus for Predictions - 16 April 2009
- Our Plus-Minus Is Now Seventeen! - 16 July 2009
- Predictions Plus-Minus Update - 15 October 2009
- Predictions Plus-Minus Update - 21 January 2010
Labels: forecasting, track record
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