2014 SP 500 return scenario’s <\/a>one element that impressed me was that it wouldn’t take too much “extreme” numbers to result in the SP 500 generating a high teens, 20% return in 2014.<\/p>\nHere is the math:<\/p>\n
Current (as of 1\/3\/14) ThomsonReuters top-down SP 500 EPS estimate for 2013: $109.05<\/p>\n
The bottoms-up estimate for 2013 is $109.13, while I think by the time we get to late March and q4 ’13 is fully reported we\u00a0have a final ’13 EPS of \u00a0$110;<\/p>\n
Expected SP 500 EPS growth in 2014 is 8%, while I think the SP 500 can do 10% EPS growth in 2014;<\/p>\n
$110 * 10% growth ($110 * 1.1) = $121 per share in expected SP 500 EPS in 2014.<\/p>\n
The SP 500 closed at 1,848.36, on 12\/31\/13.<\/p>\n
At 18(x) $121 EPS, y\/e SP 500 target is = 2,178, which is 17.8% capital gain for SP 500 in 2014<\/p>\n
At 19(x) $121 EPS y\/e SP 500 target = 2,299, which is 24.38% capital gain in 2014<\/p>\n
At 20(x) $121 EPS y\/e SP 500\u00a0target = 2,420, which is a 30.9% capital gain in 2014;<\/p>\n
The key metric to this scenario is that the SP 500 has grown at roughly 2(x) P.E-to-Growth rate in the last year, usually above 2(x).<\/p>\n
10% EPS growth at 2(x) PEG is 20(x) year-end ’14 earnings. That is a 30% return.<\/p>\n
The combination of both\u00a0“earnings growth” and p.e expansion produces the SP 500 annual return.<\/p>\n
Our official forecast is for 5% – 15%\u00a0SP 500 return in 2014. The economy and earnings are fine, but worries over the Fed and rising rates will suppress returns in my opinion, ala 1994.<\/p>\n
However like a lot of strategists, we could wind up\u00a0with a\u00a0too conservative forecast.<\/p>\n
Hope you aren’t offended by the assumptions: it is pretty doable math. 10% earnings growth and\u00a020(x) multiple. (I’m practically apologizing for being bullish.)<\/p>\n
So much depends on the Fed and interest rates.<\/p>\n
Trinity Asset Management, Inc. by;<\/p>\n
Brian Gilmartin, CFA<\/p>\n
Portfolio manager<\/p>\n","protected":false},"excerpt":{"rendered":"
Eddy Elfenbein is a great Tweeter under @EddyElfenbein. Follow him and reap the wisdom. One reason I like his Tweets…<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[93],"tags":[],"class_list":["post-3108","post","type-post","status-publish","format-standard","hentry","category-sp-500-forecasts"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/3108","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3108"}],"version-history":[{"count":5,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/3108\/revisions"}],"predecessor-version":[{"id":3113,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/3108\/revisions\/3113"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3108"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3108"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3108"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}