There Will Be Ice Cream At The End Of The Ride


January 2, 2018

It’s time to hop into our pink Cadillac and buckle up for a “Prediction Drive”. The car is all gassed up and comes equipped with new shock absorbers as a precaution given the expected bumpiness of the road ahead. Anticipation is high following a rough and chaotic 2018 market.

As we prepare for the ride, let’s look in the rear-view mirror and see how our prognosticators fared in 2018. Last year the average of the forecasts from our market gurus was that the S&P 500 would close at 2,825, with a range of predictions from 2,675 to 3,000. As of close of business on Monday December 31st, the S&P 500 was 2,507 after starting the year at 2,673. The high point was 2,923 on October 2nd, before staggering much lower over three volatile months of trading.

So what are the smartest minds in the market forecasting for 2019? Here are the bold calls from our 11 contestants:

Market Predictions for S&P at the End of 2019                     

Morgan Stanley 2,750
Credit Suisse 3,350
Bank of America 2,900
Jefferies 2,900
Goldman Sachs 3,000
Barclays 3,000
Citigroup 3,100
JP Morgan 3,100
BMO 3,150
UBS 3,200
Deutsche Bank 3,250

That’s an average call of 3,063 which would be up 22% percent from Monday’s close! The forecasts are based on the various firms’ views on corporate earnings which by all accounts appear to be very positive.

What about other predictions for the upcoming year?  Interest rates were a big story in 2018 and remain so in 2019. The Fed is forecasting two increases in the Fed Funds rate following the four increases this past year. That would take Fed Funds rate from the current 2.25-2.5% to 2.75-3.0%. Things are looking up for savers! Experts in the mortgage market foretell that long-term mortgage rates will hover in the low 5% range, with an average expected 30-year mortgage rate of 5.1% to 5.2%.

Oil prices remain as unpredictable as ever. In 2018 the price of West Texas Crude oil ranged from a high of $76.40 to a low of $43.36. 2019 is starting on the same uncertain footing. One noted oil analyst, who is paid to predict prices has stated that “oil prices will be difficult to predict”.  With insight like that it might be difficult for him to predict his pay.

2018 will be remembered as the year when market volatility and unpredictability returned dramatically to our investing lives. But we are still on our financial journeys and we each have our own desired destination. The central message for 2019 is that we must be aware of what is in the rear-view mirror but remain focused on what’s coming at us.

Before we get going I would like to swing by the Dairy Queen and pick up some Blizzards for everyone. Perhaps the flavor we should choose to honor this past year is “Rocky Road”.

Carl Gambrell