The S&P Hit My Year-End Target 11 Months Early – So Here’s My New Forecast

No one can be right all the time – but I do my dead-level best.

I call it like I see it, and that means when I miscalculate, I own up to it.

Here’s a case where I got the numbers right, but the timing wrong – and then I went ahead and took my prediction a step too far. If you’ll recall, last December I released a bearish forecast for year-end 2016, predicting that (contrary to most Wall Street rhetoric) the S&P 500 would hit 1,875 before the end of the year.

That prediction came true just weeks later…

After a brutal first two weeks, we shaved 1,417 points – more than 8% – off the Dow. The S&P 500 dipped well below my 2016 year-end target of 1,875-1,900, hitting 1,829 before recovering.

At that point, I revised my 2016 forecast even lower, down to 1,650 to 1,750.

As it turned out, I should have left well enough alone.

It’s been obvious for a while that the S&P 500 was not going to hit my revised year-end target of 1,650 to 1,750. As we enter Q4, we are in a market gridlock, with stocks hovering near record highs based on the misplaced belief that central banks are all-powerful. It will most likely take one of these two events to dislodge them.

So here’s my new forecast…

My Revised Year-End S&P Forecast

Central banks have managed to convince markets that they can keep the overleveraged global economy from falling apart, despite signs of strain throughout the world. The collapse of global trade is just one sign that the post-crisis economic cycle is in its late stages. I was likely guilty of “marking to market” when I lowered my original 1800 target to 1650 earlier this year.

I now believe the market will end the year in the 2050-2100 range with a bias to the downside if (a) Italy votes against constitutional reform on Dec 4 and (b) the Fed raises rates in December. (The odds of a Fed rate hike are continuing to rise and are now priced at over 70% in the Fed futures market.)

Italy is getting ready to vote on changing the Italian constitution on December 4. The referendum would limit the powers of the Italian senate, which is viewed as a source of political gridlock. The vote is seen as a vote of confidence in the current pro-European Union government headed by Matteo Renzi.

If the referendum fails, it is likely to open the door for anti-EU parties to take over the government. Sources in Italy tell me that the polls are currently leaning toward defeating the ballot measure, something that markets are not expecting.

The Financial Times recently warned: “An Italian exit from the single currency would trigger the total collapse of the Eurozone within a very short period. It would probably lead to the most violent economic shock in history, dwarfing the Lehman Brothers bankruptcy in 2008 and the 1929 Wall Street crash.” Coming from a publication not prone to hyperbole, this warning should be taken seriously. Italy is home to the world’s third largest bond market (after the US and Japan) and the third largest economy in the European Union (after Germany and France).

I’ll have some specific profit recommendations for you before too long.

Sincerely,

Michael

 

15 Responses to “The S&P Hit My Year-End Target 11 Months Early – So Here’s My New Forecast”

  1. Michael – “…when I miscalculate, I own up to it.” is a prime reason I follow your recommendations and articles. Sadly, the integrity this demonstrates is rare among financial authors. The norm is exaggerating the gains and not mentioning – or minimizing the losses and failed predictions. It’s human to make mistakes, but you can’t learn from them unless you first own them

  2. GINGER FRENCH (DR,)

    i’M WITH STEVE GORSHOW 100%. We are living in a country (and maybe a world) in which integrity, honesty, and truth are not often honored. Far too many people have been zapped by the “PC Police” too many times and are intimidated. They are afraid to say anything about how they feel and what they truly believe. It is a sad and frightening state of the nation, and a huge change from what was promoted and taught freely in the schools when I was growing up. I read a study recently that cited the following — “The average American lies 11 times a day.” I work very hard to speak in truth. If I disagree I say I disagree unless people are angry enough that I think there is a possibility of physical violence. But if the average American tells eleven lies a day and some of us are working hard to tell the truth all of the time, the conclusions from that speak poorly for the overall population. Kudos to Michael!

  3. Hey Michael I like your analysis but you were wrong about the S&P even if it did trade at your target for a hot minute. If you told people to buy every single dip this year it would have been a far superior trade. In my book that makes you wrong. However, I still like your analysis.

  4. Terry M. Sparks

    I would like to invest. How can you help me? How can I invest so little funds.? How much is required to invest. I’m 57 never had a chance to invest I don’t have much money. But I’m tired of not being able to make ends meet every month. Are there any investors whom will take a low amount to start investing,.

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