Wall Street analysts — the ones who predict how stocks will perform — are habitually overconfident.
Everybody knows this.
Still, this graph that Harvard Business Review published today, based on data from McKinsey Quarterly, is worth a look.
It shows that analysts' projections almost always overestimate the growth of corporate profits. On average, over the past 25 years, analysts predicted that the earnings of companies in the S&P 500 would rise by 13% per year. Instead, they rose by 7% per year.