Top analyst sees S&P 500 at 2,100 soon
Strategist forecasts the index will rise 12% over the next six months -- as long as interest rates remain low.
Sam Eisenstadt has a fabulous birthday present to give the bull market as it celebrates its fifth anniversary: A forecast that the S&P 500 Index ($INX) will rise 12 percent over the next six months.
Note carefully that Eisenstadt is not a shameless shill for Wall Street, always projecting higher prices. He is the former research chairman at Value Line, and a rigorous student of the markets. Though he retired in 2009, after 63 years at that firm, he continues in retirement to update and refine a complex econometric model that generates six-month forecasts for the S&P 500 -- and shares them with inquiring columnists.
Far from being a perma bull, if anything his model in recent years has been too cautious. At 2013's midpoint, for example, it in effect thought the market had gotten ahead of itself -- and was projecting that the S&P 500 would fall 2.4 percent through the end of the year. The market actually rose smartly over the last half of the year.
So we should take seriously his latest forecast that the S&P 500 will rise to 2,100 by September.
Though Eisenstadt's model is not perfect, its track record has been impressive statistically. He reports an r-squared of 0.33 for his model since the early 1950s, which means that it has been able to explain 33 percent of the variation in six-month changes in the S&P 500. (The r-squared is a statistical measure of how much one data series is correlated with changes in another; a model that had perfect explanatory power would have an r-squared of 100 percent.)
Eisenstadt constructed his model to combine all inputs that his research found to have any stock market forecasting ability. So there's no one factor that is responsible for its current forecast of a much higher market over the next six months.
But, in an interview, he said that one big factor is continued low interest rates: "Unless rates start picking up in the next few months, the outlook looks very bullish."
Eisenstadt confessed to being "almost embarrassed" by how bullish his model is, since the market has already been so strong. But, given that he trusts his quantitative model over his gut instincts, and given that his model has been too cautious recently, he doesn't "want to argue with the model."
Not arguing with the model is a very important principle for Eisenstadt, in fact. His rigorously empirical and quantitative approach is based on the fundamental tenet that all beliefs about investing should be subjected to mathematical verification. Unfortunately, he says, "most advisers fail to live up to that standard."
Of course, just because Eisenstadt holds himself and his model up to this standard doesn't guarantee that the market will be 12 percent higher in six months' time. Note that, even with a 0.33 r-squared, his model still is unable to explain more than half the variability in the S&P 500's six-month returns.
Yet Eisenstadt says he is unaware of any model that has a higher r-squared than his when explaining six-month returns. If so, that means that -- while anything is possible -- any forecast for a return higher or lower than a 12 percent gain will have even less probability.
I think most of us would be happy even if his model is only half right.
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"A forecast that the S&P 500 Index ($INX -1.08%) will rise 12 percent over the next six months."
Um, OK, let’s make that 13%, based on today’s drop of more than 1%.
"Far from being a perma bull, if anything his model in recent years has been too cautious. At 2013's midpoint, for example, it in effect thought the market had gotten ahead of itself -- and was projecting that the S&P 500 would fall 2.4 percent through the end of the year. The market actually rose smartly over the last half of the year.
So we should take seriously his latest forecast that the S&P 500 will rise to 2,100 by September."
In other words, some dude's predictions were so wrong last year, this writer suggests we should now pay even more attention to his predictions this year?! WTF! Wouldn't a recent track record of being wrong be more of a reason to ignore someone?
I have to ask:
What did Putin have for lunch today? Fried chicken? Watermelon? Maybe just a beer?
maybe....but I'm out and have been for a bit now.
way too high off the bottom for NO good reasons beyond this sham of a political market rise that O'shameful is orchestrating.
Bailouts and the fed pumping money in were at least 80% of the rise....when we SHOULD have let it bottom on it's own and found new market leaders and new jobs from real companies, not people on the welfare dole! I'm not betting on the down....just watching from safety for awhile....I'd be more apt to buy a put than a stock right now....we'll see.
Maybe we can get a few more senate seats and overturn Obamacare - THEN the markets would EXPLODE to the upside! lol.
Why do these MSN (more stupid news) writers continue with this type of articles thinking they live in a static, unchanging environment ? I love how the caption below the title that refers to the S&P index hitting 2100 AS LONG AS interest rates remain low.
Do you think there is more risk now in Europe with Russia invading Crimea? ==>interest rises !
Do you think there is more risk now in Russian banks assets being downgraded? >interest rises!
Do you think there is more risk now with China's manufacturing slowdown? ==>interest rises !
Do you think there is more risk now in those emerging markets? ==> interest rises !
It's pretty simple if you put some thought to it instead of listening to Obama, Carney( complete idiot) and other liberal fools who project weakness; which is the best way to encourage an aggressor !
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Bill Stiritz owns more than 5% of the company, and has experienced an estimated $145 million in paper losses on his investment.
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