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2019 is nearly here, and that means it is time to roll out my ten predictions for the new year. As I did last year, I will start with number 10 and work our way up to number 1 over the last month of 2018. Enjoy!
Prediction #1 – The S&P 500 Rises 20% to 3,000 in 2019
The S&P 500 has fallen 16% since its October highs but with the Fed on hold, interest rates and the dollar falling, oil rising, and the trade war settled the stock markets risk appetite comes back in a big way in 2019.
Too Cheap
At its current valuation, the S&P 500 is trading at just 15.8 times 2018 earnings estimates and 14.4 times 2019 earnings estimates. Dow Jones S&P Indices now estimates that earnings will grow 9.6% in 2019, a respectable showing. But the current PE ratio is well below its historical average since 1988 of 18.7 for the current year or 17.75 for the next twelve months. It makes the current valuation for the equity market too cheap given all of 2018 worries are now in the rearview mirror and settled.
A Rise to 3,000
Growth will slow some in 2019 but stays strong enough so that we do not have an earnings recession. As a result, the earnings multiple will once begin to rise. Even if it expands back to its historical average of around 17.8 times 2019 earnings estimates, the S&P 500 could increase to roughly 3,063 about 21%.
It eases the pain of 2018 and makes 2019 a year of economic prosperity setting up President Trump’s re-election in 2020. I think I just made a prediction for 2020.
It makes the S&P 500’s increase of 20% to 3,000 prediction #1 for 2019.
Hope you enjoyed all of these!
-Mike
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S&p 500, stocks, stock market
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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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