Around this time of year – a wrath of ‘experts’ forecast where they believe the S&P 500 will finish the year. For me it serves little purpose. For one, most of the time forecasts are typically wrong (and by a wide margin). Second, as time goes by, more information will come to hand which often changes our view. From there, forecasts should be updated. Third, there are almost always random events which reset the game. What happens to forecasts then? They are typically tossed out the window. With that, let’s look at what the market “experts” believe we will see this year – and I will offer my approach.
"S&P500"
Reverse Goldilocks Coming?
2024 has not started the way we ended 2023. From mine, late last year feels a lot like what we saw at the end of 2021 (and early 2022). At the time, investors chased momentum in fear of missing out (‘FOMO’) – pushing multiples into what I considered ‘higher risk’ territory (i.e., above 20x forward). It was a time to lower exposure. As we start the new year – stocks are taking a pause. And it’s not unexpected given the sharp run higher. However it begs the question… could it be something more than a pause? Of course we don’t know the answer (no-one does). Where there is uncertainty – all we have are probabilities.
2023 – The Year in Review
2023 has come to a close… and what a year it was. For many, it will go down as one of the more challenging. For others, they will have banked some very attractive gains. In short, the S&P 500 recovered from its worst year in over a decade – finishing the year 24.2% higher. As for myself, my portfolio returned 19.63%. I made some errors this year (which I will discuss) but also had a couple of wins. Net-net – it was a solid year given the unchartered waters we were navigating.
Did We Just Pull 2024’s Gains Forward?
Stocks were already partying into the Fed meeting (up ~12% over 6 weeks) – however when Powell provided his December update on monetary policy – he simply turned up the music. Risk was on. So here’s my question – with stocks up an incredible 15% in just 7 weeks – how much of next year’s potential gains have been pulled forward? Is it riskier now to buy stocks than it was a few weeks ago? To be clear, stocks are likely to add to their gains before the year is done – however we are now trading close to 20x next years earnings. That’s not a bargain.
For a full list of posts from 2017…