S & P 500 forecast (fair value model):
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The author assumes no responsibility for the accuracy or inaccuracy of
forward-looking projections contained herein and you should only use these
projections at your own risk.
An explanation of this graph appears below the chart.
Note !!!! -- Oct/2013
The magnitude of the forecast s&p500 values has become unstable ever since the Fed has been doing it's QEs 1,2,3,4 and Twist.
It seems inflation and interest values are shall we say artificial. This variation between forecast and actual would imply that the investor does not believe these published data points.
The turning points still seem valid but in order to pull the magnitude back to reasonable levels, questionable data modifications have been made. The model remains the same but the input data has been modified.
Use this forecast with extreme caution.
New and updated model - 12/07
The only model change is a slight modification to the inflation expection component. It now better reflects inflation on an international basis and not simply the dollar based CPI number. The model and all other components remain unchanged.
The chart shows a forecast (actually a fair value) for the
S & P 500 index versus the actual.
o The Blue line represents a fair market value that a prudent investor should
be willing to pay for the S & P 500 index given economic and earnings data.
o The Red line represents a historical value as determined by the market.
o This valuation method results in a firm number 6 months prior to the month
being evaluated. Estimates for months 7 to 12 are subject to change as
data used for these months firm up. (no longer preliminary at the source)
o All future valuations are made using only economic and S&P data.
o No S&P price data, past or present, is used in making the valuation.
o Each valuation point on the Blue line was made 6 months prior to the
date for which it is shown. It has not been modified for events happening after
the valuation was made.
o The S & P number represented as actual is the closing price for that month.
The value of this forecast is that it is made 6 months prior to the month
in question. It can best be used to anticipate market turns based on outside
economic influences. New numbers used to make this forecast are available
about once a month from Government and S&P sources. I will try to keep up
the forecast on a monthly basis. Currently the actual and the forecast have
diverged giving an opportunity to test the model validity.
Last data update was the end of Oct 13 for actual and mid Nov 13 for
forecast data. Note! Only the first six months forecast 11/13 thru 04/14
are not subject to revision. The longer range forecast numbers are based on
forecast and preliminary numbers and likley will change.