Markets could not be more optimistic about the future. We see it with consumer sentiment, spending and in the stock market. For example, the S&P 500 surged to a new record high 6090 – far exceeding the most bullish of forecasts from 12 months ago. Will analysts be equally bullish about 2025? Post Trump’s Nov 5th win – the bulls have found another gear. Trump has painted a compelling vision of a US economic resurgence built on three primary pillars: (i) lower taxes; (ii) sweeping deregulation and government reform; and (iii) an
emphasis on domestic production. Why does this have corporate America very excited?
S&P500
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Tobin’s Q-Ratio Trades at Historical Highs
By just about any intrinsic measure – the stock market looks expensive. Ben Graham would be warning investors to heed caution. Now one of the more widely cited metrics is its forward price-to-earnings (PE) ratio – which trades at a very high 22x. However, another intrinsic measure is James Tobin’s Q-Ratio – which now trades at a record high – exceeding that of the dot.com bust. And whilst not a great timing tool – it maintains a very reliable record of picking long-term secular highs.
Here Come the Foolish Forecasts
Once again, it’s that time of year. Investment houses are set to release their forecasts for the upcoming year. Why they bother I don’t know? And whilst there is still approx one month to go – if the markets finish anywhere near 5,800 – most forecasts made for 2024 will be abysmal. The average end-of-year forecast for 2024 was ~4600. The closest looks like being Ed Yardeni – who forecast 5400 – however at the time appeared wildly bullish. Well done Ed.J.P. Morgan told their clients we would finish 2024 around 4200 – currently more than 40% off the mark…. could it get any worse? So what do you think they will tell us for 2025? My guess “up in the realm of ~8%”. Why? Because that’s the 100-year average.