The State of the Markets:
Good Tuesday morning and welcome back. Last week, I took a just-for-fun stab at modeling expectations for what calendar year 2020 might look like in the U.S. stock market. And since stocks seem to only go up these days, the question of the day isn't whether or not the S&P 500 will advance on the year, but rather by how much.
If you recall, my just-for-fun model's "final answer" last week suggested the S&P 500 would close the year at 3618.47, which would represent a gain on the year of a nice, round, 12%. Given that the average return of the venerable index has been almost 9% since 1980 (8.93% to be exact, according to Ned Davis Research) and nobody sees a recession in sight, I'm happy leaning toward the bullish end of the projection spectrum these days.
While hardly scientific, I arrived at my official guesstimate by taking the average returns projected by my models (which included models on the economy, the technical health of the market, monetary conditions, inflation, leading indicators, the average election year return, and a composite of earnings models) assuming each model moved up and down one notch from current levels. It seemed to make sense to me at the time.
This week, I'd like to take a different tack and look at what some of the classic historical cycles project for the coming year.
What Do The Cycles Say?
Long-time readers of my oftentimes meandering morning market missive are very familiar with something called the "Cycle Composite." This is a computerized mash-up of the one-year seasonal, the four-year Presidential, and the ten-year decennial cycles created by the good folks at Ned Davis Research.
As I have stated a time or twenty, I ...