Read on Twitter
1) Here's why I think the S&P 500 will revisit the March low. (Note: this prediction is worth exactly what I'm charging for it!)
The 2020 S&P GAAP estimate is currently around $100. For 2021 it's around $150. I think the latter number is ridiculous. Here's why...
The 2020 S&P GAAP estimate is currently around $100. For 2021 it's around $150. I think the latter number is ridiculous. Here's why...
2) 2019 U.S. GDP was $21.2 trillion. If it's 15% lower this year it regresses to the level of 2014/2015, when earnings were around $95, so there's my guess for 2020.
If 2021 GDP is 8% lower than 2019 (my social-distancing WAG) we're at 2017 levels, where earnings were $110.
If 2021 GDP is 8% lower than 2019 (my social-distancing WAG) we're at 2017 levels, where earnings were $110.
3) Of course, if a Democrat wins the White House the corporate tax rate will inevitably be higher, but let's put that aside and use $110 for 2021 GAAP S&P earnings.
Now of course there's the question of what multiple to put on those weakly growing earnings.
Now of course there's the question of what multiple to put on those weakly growing earnings.
4) The S&P PE in 2010 (a year after the 2009 ugliness) was 20x, then dropped to 16x in 2011 and 15x in 2012. If we generously use 20x $110 for 2021 that's 2200, which coincidentally was almost exactly the March low (2192). So I think we'll retest that low later this year or 2021.
5) As @Tryggvas points out, the lower corporate tax rates didn't go into effect until 2018, so under this analysis (whereby I assume 2021 GDP = 2017's) the S&P would earn $120 in 2021 (not $110) and my target thus becomes 2400 not 2200; 2400 is down 18% from last Friday's close.
