It’s in the Genes
“Can you give us any sense as to what the market will do this year?”
This is a question that we often hear from clients in the beginning of the year, and for entirely good reasons. If you are an endowment trying to plan out your spending for the year, or a retiree considering taking not one but two expensive trips abroad, knowing how your assets will do can go a long way towards alleviating your stress about spending from your portfolio.
The question is often delivered with a little bit of sheepishness, as if the client asking already knows the answer we are going to give, and feels maybe a tad guilty about putting us on the spot. And sure enough, we give the answer that they already knew was coming: “we don’t know,” or “well, we can’t really predict the future performance of financial assets.”
We know this answer is frustrating, but we can’t help it. With a few of us, this answer is literally part of our DNA. Nearly forty-five years ago, my father, Edward Snitzer, and his partner Marshall Blume—a finance professor at Wharton—founded this firm on a principle that was radical for its time: the future performance of the financial markets is essentially unpredictable. We have been hearing this point since before we were able to drive.
For my Dad and Marshall, this was not some admission of failure. It was a point of pride. In 1987, the Philadelphia Inquirer ran a piece on the firm that captured the firm’s essence. When the reporter asked what was going to happen next in the markets, he received this answer:
Don’t ask Edward Snitzer or Marshall E. Blume… they haven’t the foggiest idea what the market will do next. Furthermore, they don’t think anybody else does, either. And they don’t think such questions are the ones that thoughtful investors should be posing, anyway. Instead, say Snitzer and Blume, investors should ask themselves what kind of risks they must take to meet their financial needs. And how can they develop an investment program to meet those needs?
To be fair to us, our answer to this question is more robust than a simple “I don’t know.” We do have an opinion on the possible average return of our model portfolios and the possible range of returns those portfolios might experience over a one and five-year period. These expected returns are calculated using current equity valuations in the market and current bond yields, and the range of returns – the risk – are calculated using historical returns. We think this is a more responsible approach than shrugging and saying “beats me” or proclaiming with absurd precision that “the market will return x% this year”.
Absurd precision was the approach taken by the giants of Wall Street for many years. Maybe some of you remember the headlines: “Goldman Sachs predicts the S&P 500 will hit 3,000 by year-end.” Why did they do it? It was not because they had a secret crystal ball. First, it was a simple matter of supply and demand. Clients demanded certainty and banks wanted to make their clients happy. This is natural: nobody likes hearing “I don’t know” from their financial advisor.
Second, Wall Street is not a place of small egos and humility. Many people who worked there in the past really did believe that they knew how the markets were going to perform because they possessed a special talent and superior intelligence for making these predictions. Many of their clients, of course, wanted to believe that this was true, too.
And third, these predictions were essentially entertainment—a form of Groundhog’s Day or astrology. Assisted by a financial press with similar motivations, the large banks competed every year to see whose forecast was best, a battle of the gurus.
The truth is that we are “stuck with uncertainty.” Eventually—and thankfully—the industry began to adopt the approach that PMA has followed, abandoning the “magic number” in favor of the probabilistic approach. Years like 2008, 2020, and 2022 proved that precise estimates are useless in the face of unexpected future events. Humbled by events, and not wanting to provide fodder for future derision in the financial press, Wall Street firms, and the gurus they employed, shifted.
Instead of pretending they can see the future, modern reports now look more like weather forecasts. For instance, in their 2026 Outlook, J.P. Morgan Global Research provides a “distribution of outcomes.” They assign percentages to different scenarios, acknowledging that the future is a range of possibilities, not a single destination.
As we navigate 2026, we remain focused on the questions my father and Marshall Blume first asked many decades ago: What kind of risks should you take to meet your needs, and how can we develop a program to meet them? Market values are currently supported by strong earnings, but we aren’t ignoring the clouds on the horizon—the weak labor market and those geopolitical “unknown unknowns.”
We aren’t here to time the market; we are here to manage your risk within it.
