Investment Chart Kondratiev Wave

Investment Chart Kondratiev Wave

Thursday, 3 January 2013

S&P to go to 1620-1650 in 2013

Business Insider had some nice slides where several gurus showed their chart of the year. The above of Matt King shows how the S&P500 marched up with the balance sheet of the FED. A $1000 billion QE was enough to get the S&P500 320 points higher.

It is not at all clear how much Money the FED will throw to the markets in 2013. they promised $85B each month for the time being, less is not possible with current fiscal spending cliff uncertainties. But what to do when the economy recovers in H2, or worse when the confidence in the FED to prevent inflation will go down? Then QE will stop. For the time being it is estimated that the FED will buy between $500B and $1000B. Let us say $750B, then the S&P could rise 240 points to about 1650.

This chart of Kleintop showed how well the S&P tracked the average presidential cycle of the last 28 years. This could continue and should mean about 15% for the S&P in 2013, or about 1620 for the S&P500.

15% in the first year of a president is more than average since WWII (there were several nasty bear markets in the first six/seven quarters of a president cycle) , but maybe it is possible with the of Bernanke. Profit growth will be much lower in 2013 but expectations for 2014 could improve.

So 1620-1650 is an educated guess according to the president and monetary cycle.


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