Forecasts For The S&P 500 – Are They News or Noise!
Hey, I’m Chris Perras, Chief Investment Officer with Oak Harvest Financial Group. This is our investment team’s mid-week release when we examine a news item, headline, or story making the rounds from publicly available sources and ask, “Is it News or Noise?”
Before we continue, please take a moment to hit that subscribe button and the notification bell, so that you’ll be notified when we upload new content.
So here we go..
By the time you are viewing this, 2021 will be in the books. We are filming this on December 30th, so I can’t say exactly where the SP500 closed out the year, but it was a great year in the American financial markets. Over the last 2 months, every sell-side strategist I know has come out with their 2022 lists. They have written about their Top 5 predictions for 2022. Their Biggest 10 surprises for the year. And yes, my favorite, where will the S&P500 end 2022 list. No one asks them if they have been even close to right in their prior forecasts.
And guess what I know will come true in 2022? Over 90% of what was written by these people won’t happen or wont matter to the markets if it does. The SP500 was on track to end 2021 at around 4800 or up almost 27% as of the filming of this video after gaining 16% in 2020.
Just to let viewers who are joining us for the first time know, the investment team at Oak Harvest first published our 2021 outlook way back in December of 2020 with a conservative year end 2021 target of 4600 and followed it up in our second half 2021 outlook with this forecast, and I am quoting from our June 2021 posting on the web.
“With these things in mind, our year end view of a possible move over 4600 on the S&P 500 seems not only attainable, but perhaps even conservative looking at valuations, earnings, options markets, and investor demand for equities. If pressed, we would say that into the seasonally strong 4th quarter 2021 and 1st quarter 2022 time period could potentially lift the S&P 500 over 4800-4850 and could even approach 5000 in a blowoff in January of 2022.”
So you look through the 2022 forecasts and what do you see, Morgan Stanley is once again at the low end with a 4400 SP500 target, Wells Fargo is at the high near 5300 and the average is between 4950 and 5000. This equates to about a 4% return in 2022. I can tell you viewers what number the S&P500 won’t end 2022 at? It won’t be 5000. The average forecast has never been close to being right.
Most of these forecasts are relatively downbeat due to the Fed tightening monetary policy, inflation forecasts, or just plain conservatism after two strong years. But viewers here are the historic facts. Which in turn seems to point toward and triangulate around our mathematically derived target of 5500 for year end 2022 or early 2023.
According to FundStrat, historically, since 1938 there have been 8 years where the SP500 gained over 27%. Only one of those years was negative, 1946. Of the 7 positive years gaining over 27%, the average return the next year was 12.2% and the median return was 16.3%. Let’s split the difference at 14.2% and that return on top of 4800 would yield almost exactly? Of course, 5500.
The lesson from this story. 2 historically good back-to-back years in the stock market do not, I repeat do not, mean a negative or even low single digit return year is in the cards. That’s not how the economy and stock markets have worked over time. These forecasts and stories while fun to read and listen to are most often, just more noise along your retirement investment journey.
From the whole team at Oak Harvest, thank you for your support and trust throughout 2021, and we hope we can continue to be your partner and provide you with value added service in 2022.
And Viewers, feel free to give us a call here to speak to one of our advisors. Let us help you craft a financial plan that meets your retirement goals and needs first, and your greed’s second. Call us at (877) 896-0040 we are here to help you on your financial journey into and throughout your retirement years.
News or Noise: Noise
Disclaimer:
This content contains general information and express the views of Oak Harvest Investment Services. All data, articles, and information cited are believed to be reliable at the time of creation; however, Oak Harvest does not warrant any information contained herein to be correct, complete, accurate or timely.
Oak Harvest provides links to content produced by other websites that OHFG does not control, and Oak Harvest does not necessarily approve or endorse such content and does not guarantee its accuracy. Nothing in this content constitutes personalized investment advice. Any charts, indicators, or graphs included or referenced in this content have limitations, and no such material is able, in and of itself, to provide a buy or sell recommendation for any security. Strategies and ideas discussed may not be right for you, and views and opinions expressed may change without notice. Strategies and ideas discussed will not apply to all client accounts or portfolios.
Nothing in this content constitutes a recommendation, or an offer or solicitation to buy or sell securities. Oak Harvest makes no assurance as to the accuracy of any forecast or projection made. Not all past forecasts or projections were, nor future forecasts and projections may be, as accurate as any forecasts discussed. Indexes like the S&P 500 are not available for direct investment and your results may differ. Past performance is not indicative of future results. Investing involves the risk of loss.
https://www.forbes.com/advisor/investing/2022-stock-market-outlook/
Are Forecasts for the S&P 500 News or Noise? We are filming this on December 30th, so I can’t say exactly where the SP500 closed out the year, but it was a great year in the American financial markets. Over the last 2 months, every sell-side strategist I know has come out with their 2022 lists. They have written about their Top 5 predictions for 2022. Their Biggest 10 surprises for the year. And yes, my favorite, where will the S&P500 end 2022 list. No one asks them if they have been even close to right in their prior forecasts.
