April 27, 2020

A summary of my near term (three months) expectations

It has often been said that a good forecaster is not smarter than everyone else, he merely has his ignorance better organized.

Here are my expectations for the S&P Index over the next several months:

* S&P cash currently stands at 2810.

* My "fair market value" calculation is 2800 on the S&P Inde - 18x 2022 S&P EPSe of $155/share. (Don't think precision!)

* I don't expect anything near a retest of the March lows.
(In short form, my reasons are: the level of interest rate levels, a likely flattening in the curve, the size of the Fed's bazooka, generally bearish market positioning and my confidence in the scientific and health communities). 

* However, I do have growing concerns about the Administration's ability to successfully manage (and "get to work") the aforementioned fiscal bazooka ("helicopter money") as well as providing a consistent and efficacious policy towards a national "reopening" that has the potential of pushing us back into the spread of Covid-19. On the latter point, it is my strong view that our nation's response to coronavirus has been a deadly mix of arrogance and incompetence. These factors have the potential to be the next market "stories" -- pushing stocks toward the lower end of my expected range. 

* My expected three-month S&P range is 2550 (9% below intrinsic value and current S&P cash) - 2950 (5% above intrinsic value and current S&P cash).

* I believe the downside of my three-month S&P range (2550) is above consensus.

* I believe the upside of my three-month S&P range  (2950) is also above the consensus.

I offer the above for the purposes of transparency and in order for you all to better understand my positioning (and move this afternoon). I remain optimistic about the intermediate term (one year or more out!). 

via twitter