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.

By MSN Money producer Mar 13, 2014 7:42AM

Arrow Up (© Nicholas Monu/iStock Exclusive/Getty Images)By Mark Hulbert, MarketWatch MarketWatch


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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Tags: $INXSPY
34Comments
Mar 13, 2014 10:40AM
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So how much tappering do we really have? Not much before Nov is my guess.  The government is still proping up the market with printed money. No real cuts still just printing more money as required this gevernment suxs.
Mar 13, 2014 12:36PM
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Most key economic data releases are revised downward, so the small gains are erased after the fact. Unemployment numbers don't give a true measure of the employment picture and employment hasn't kept pace with the those trying to enter the workforce. A key measure, average hours worked per week has been declining as more workers are being forced into part time jobs and this translates into lower payroll tax receipts for the treasury. Declining payrolls also increase the the amount of government subsidies for healthcare and demand for public assistance such as food stamps and medicaid. The federal budget balance is forecast to be be -212 billion from -10 billion last month. The foundation of our economy is fundamentally flawed and QE pumping the markets is just another bubble by design to avoid a revolution by the masses.
Mar 13, 2014 10:06AM
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Fundamentally, not much has changed much from this time last year - QE still rolls on, UE remains stagnant but isn't falling off a cliff, GDP growth is dismal but mostly consistent - same with consumer spending and home prices, interest rates are about the same, etc...  So with a lot of indicators staying where they're at, a decent run up this year is definitely not out of the question.   However, none of this matters anyway, because it isn't real.  But if you want to keep setting reality aside, enjoy the ride while it lasts...
Mar 13, 2014 11:50AM
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"Strategist forecasts the index will rise 12% over the next six months -- as long as interest rates remain low."

What would a low interest rate continue to do? Allow corrupt business platforms to borrow more gambling game tokens and avoid hiring actual people and doing enterprise. Is THAT worth your investment? 
Mar 13, 2014 12:48PM
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Why don't the empty headed baboons at the fed (the government) come completely clean and just admit that they set the S&P exactly where they want it to be? Then they can quit the game playing and just tell everyone where it will be at the end of each of the next ten years or so. Then CNBC can go off the air and all these analysts with their silly "reasons" as to why the markets go up or down can be fired. It's not Ukraine, China, Jitters, profit taking, taxes, or uncertainty...The whole thing is written and orchestrated like a bad soap opera with the faithful waiting to see what crazy plot line the writers will come up with next. The stock index values are a farce.  
Mar 13, 2014 1:12PM
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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%.

Mar 13, 2014 1:26PM
Mar 13, 2014 11:08AM
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Nothing made up folks, call it as we see it...At 1040 hrs the call came and down the toilet we go again....Made no sense to be up over 50 points when all we have is manipulators on and off the floor this morning, typical sign of just another sucker's rally....Now we are down over 40 in the Dow and counting so these scumbags are feeling great.....Remember, these crooks make money buy manipulating markets down any way they can....Well, apparently another one for the cheaters...Maybe this afternoon something can be done. Sad, especially since news were decent this morning but, like we always say: News do not move markets, people do.
Mar 13, 2014 10:29AM
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Another crystal ball guru filling the air with words. When they guess right, they're hailed an insightful genius. When wrong, it's just like they said about Freud.. a genius makes no mistakes, his errors are the portals of discovery.
Mar 13, 2014 1:03PM
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"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?


Mar 13, 2014 11:47AM
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On what? Kool Aid? Every morning we get gross steerage articles by AP and Reuters. WHEN does MSN block the Yellow Journalism and do some genuine investigative journalism? Where are we headed with MASSIVE debt no enterprise and an overwhelming GLUT of administrators, paper and button pushers? Fewer new unemployment claims but clearly MOST of the nation is destitute.

Crash the markets. Close the banks. End the Federal Reserve. Get RID of Wall Street. 
Mar 13, 2014 1:55PM
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There is so much global currency manipulation and other government interference in markets that I can't agree that even a good model can predict anything. Far better to watch either momentum or moving averages or trailing stops (or some combination), which only look at where you are and not at prognostication. At least you'll be out before the worst hits, though you'll never get out at the absolute top. And you'll probably get some whipsaws, but at least you'll sleep at night.
Mar 13, 2014 8:05AM
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booooo yaaah scheet. Too many headwinds.
Mar 13, 2014 1:37PM
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@ in glock I trust-- The job loss with out the bailout would have been 4,000,000 that's million jobs not counting all the business's in the area that had help from all the workers going there and spending money. All those workers would not be putting in taxes or paying into social security or anything else. Go check the amount of jobs that Bush created compared to Obama Bush job creation was the worst since they started keeping records
Mar 13, 2014 12:34PM
Mar 13, 2014 3:34PM
Mar 13, 2014 1:55PM
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I have to ask:

What did Putin have for lunch today? Fried chicken? Watermelon? Maybe just a beer?

Mar 13, 2014 1:30PM
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I think I read the other day....that if we paid back 10 million dollars a day, it would take us 4,777 years to pay back our 17 trillion dollar debt.....I have no idea if that is correct as my cheap Wal-mart calculator made in China doesn't do exponential math.....I say.....Everyone in America stop paying taxes.....The U.S. Government has no intention of paying back our debt......So why do they need our tax dollars ?????  And the stock market is at an all time high.......makes sense to me......Ok....I am off to put my steak knife into my light socket to clean it out........Adios!!!!!
Mar 13, 2014 1:22PM
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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.

Mar 13, 2014 1:43PM
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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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