Increasingly, discussion in the financial media is turning toward whether the S&P 500 will continue to rise, or perhaps even retreat for a while. More analysts are warning about potential “corrections”.
Obviously, I’ve been addressing this question for months, as I’ve noted repeatedly that the S&P 500 futures curve has been consistently negative-to-flat, at best. Is the futures market finally turning out to be right?
Over the past few weeks or so, I’ve been sharing growing skepticism about those futures market predictions, beginning to lean more toward the possibility that upward trend in the S&P 500 would continue at least until the index reached a value of 5300 in the first half of next year, if not 5800 by the end of next year. That simply assumes that the index will continute to rise at about the same constant rate since the recovery began.
I really respect market forecasts, believing the efficient market hypothesis is mostly true, though not entirely true, as some arbitrage opportunities must exist to provide incentives to keep the market efficient. So, I will occassionally bet against the market, but that doesn’t mean anyone should follow my lead.
I’m continuing to put more money in the stock market now, as I’m almost entirely a long-term investor, and the risk of doing so is relatively low for me. I’ve gained some confidence in the Fed since they have the NGDP trend growth rate now slightly above the pre-recession trend, and this is reflected in a similar situation for the S&P 500. However, real GDP, as last reported, was still below trend, and unemployment is still above the pre-recession level, so the Fed knows its job is not entirely done. Of course, what the Fed can do about RGDP is limited, as long as the virus variants continue to impact the real economy.
Naturally, I could be wrong about the Fed, and ultimately, the question about what happens to the S&P 500 mostly depends on the Fed, so guessing the behavior of the FOMC is not exactly a science, at least as I practice it. This is a possible frontier for improvement as an investor and prognosticator.