The Flinchum File

Thoughtful Economic Analysis and Existential Opinions
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Should I Be Worried?

I’ve been predicting a slow but steady recovery for the economy. Of course, the stock market is only loosely related to the economy. The market has improved this year more than the economy has.

But, expectations for the stock market next year are awfully high. The S&P closed yesterday at 1244. Goldman Sachs predicts it will close at 1450 at the end of next year. That’s up 16.5%. J.P.Morgan predicts it will close at 1425. Barclay’s predicts 1420, while Bank of America predicts 1400.

The highest prediction is Deutsche Bank at 1550, up 24.6% from now.

If they are correct, we should substantially increase our allocation to stocks. (If they are not correct, what’s new?)

I am bullish for next year but not that bullish. Probably in the early Spring, the market will get too far ahead of the economy and stall again, like it did this summer. Then, I expect it will recover and continue upwards . . . but not to 1550.

Historically, the third year of a presidential administration is the best year for the stock market . . . I hope so!