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No PREDICTION- just a THOUGHT for the New Year 240104

Happy New Year !!!

Here’s some thoughts on closing out 2023 and ringing in 2024.

The year ended with 20%+ gains for most indexes…maybe.  Look at a long term chart and you’ll see that since 2021, the Markets have continuously vacillated ~20%+/-.  Just 8 weeks ago, the S&P 500 was down about 16%.  No one knows where it will be 8 weeks from now, but there are plenty of predictions for how 2024 will turn out.

Economists are predicting a sluggish economy with GDP growth of only 1.6%.

Wall Street prognosticators are forecasting stellar profits with S&P 500 earnings growth of 10-12%.

The reality will probably be neither.  Despite all the marketing efforts, economists and analysts can’t predict the future.  (Neither can you or I.)

As an example of analysts’ extreme erroneous optimism:

In early October 2022, Factset reported that full year 2023 bottom-up EPS estimates for the S&P 500 (which reflects an aggregation of the median EPS estimates for all of the companies in the index) would be $241.22.

Final 2023 earnings will likely come in around $220…about 9% below the prior year’s overly optimistic forecast.

This year analysts are again extremely optimistic and seem to like the concept of earnings around $240’ish…

As of 12/1/2023, Factset reported that full year 2024 bottom-up EPS estimates for the S&P 500 (which reflects an aggregation of the median EPS estimates for all of the companies in the index) would be $246.30.

Assuming they’re correct (I’m EXTREMELY skeptical) that means the S&P 500 is currently valued at 19 times earnings, which correlates to about a 5.26% return.  Keep in mind that money market funds are paying at least that much.  So effectively, the S&P 500 is priced for perfection and doesn’t offer any risk premium. 

Think about that.

If you’re still curious about forecasts and predictions, here’s a presentation I did last month:

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