Year End Forecasts
In my office, I have an iPad next to the computer that runs CNBC through the day and a TV on the wall that stays on C-SPAN. I’ve been asked many times why I have these on, and the honest story is mainly to be able to stay current with questions that my clients ask me. It generally has nothing to do with portfolio management and investment decisions. The best part of my job is that the scope is so broad, one day were taking about a management meeting of a company we own and next were reading about output from OPEC.
One continuing trend I’ve seen this week from analysts from various asset managers who come on TV to discuss the markets, is their resistance to set year end forecasts for the markets. “We don’t like to put a year end numbers on the stock market”. This is logic that I can’t understand. Im guessing that they don’t want anything to be held accountable for. Look were not going to hit the number exactly as there are several issues that drive the market price daily, however these targets can tell us if based on fundamentals we have moved too far one way or the other.
Our Year end forecasts on the S&P 500 are as follows
2017 – 2470
2018 – 2622
This is based on 19 times our earnings. We have chosen this historically high P/E based on growth expectations of the US market. Now could we change this estimate? Absolutely, if earnings prove to be stronger or weaker than expected, or pro-growth strategies become tampered, however it would take a fundamental change economically or fiscally.
I created the graph below to highlight where the market is based on our expectations. Warren Buffet says, be greedy when others are scared and be scared when others are greedy, and this is the way I like to visualize that term. And the main reason for this is to attempt to manage volatility.
I believe anyone who manages money on behalf of others should have an opinion on where the market is today and in the future. If for no other reason than to help clients avoid bad decisions. Volatility is part of investing, although we have been somewhat spoiled in the last few years, and investors need to embrace it. I just don’t see how you would achieve that without an opinion.
As always please feel free to give us a call with any questions or concerns.
Have a great week.
Any opinions are those of Mick Graham and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance.
Individual investor's results will vary. Past performance does not guarantee future results. Holding stocks for the long-term does not insure a profitable outcome. Investing in stocks always involves risk, including the possibility of losing one's entire investment. There is no guarantee that any statements, opinions or forecasts provided herein will prove to be correct. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.
