Just For Fun: 2021 Stock Market Projection

Just For Fun: 2021 Stock Market Projection image

The State of the Market

Well, it's that time of year again. The time when just about every market analyst on the planet peers into their crystal ball to conjure up a prognostication about what will happen to the market in the coming year.

To be sure, I don't employ predictions, outlooks, opinions, or gut hunches in my approach to managing money. As long-time readers are likely aware, I prefer to utilize a pragmatic, rules-guided methodology with as much modeling as I can get my hands on.

My overarching goal is to "get it mostly right, most of the time," meaning that I strive to keep portfolios on the proper side of the prevailing market cycles. In short, I want to "make hay while the sun shines" and then try to "lose the least amount possible" when the big storms hit the corner of Broad and Wall.

However, since I do have access to a market model or two, I decided to join in the prognostication fun last year. Labeling the exercise as "just for fun," I started with what I believe are the stock market's primary driving forces (the economy, earnings, monetary conditions, inflation, and valuations), added in some Presidential Election Cycle work, and then tossed in a couple of my favorite market models. I then averaged the historical returns of the S&P 500 for the current readings of each model.

When the numbers were crunched, I came up with a 2020 projection of 3713. On Tuesday of last week, when I was asked about my 2020 modeling, which, truth be told, I had forgotten about, the projection was looking pretty good. As of Friday's close, I'm off by 50 points or 1.36%. But with 13-ish trading days left in the year, I figure there's still time for the bulls to make me a hero!

Assuming the market doesn't tank or spike too high in the final days of the year, I'm going to call the 2020 projection a win - with a hearty chuckle, of course.

With a streak of one-in-a-row going, I thought it might be interesting to have a go at 2021. So, below is a summary of my analysis, with the projections using the current readings of my models highlighted in yellow. The bottom line is the current state of the models suggests a return of 9.2% for the S&P 500 next year.

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The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning's opinions and viewpoints regarding the future of the markets should ...

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