In our December 2016 year end review we wrote, "No forecast now, no forecast until April. We can't recall another time in the last 30 years that we were so uncertain about what to expect from the US government, and how that would affect the key drivers of stock market returns - revenues, earnings and interest rates.
Other analysts put out price targets for the S&P 500 of 2300-2450, which would imply gains of 3-9.5% from the current level of the S&P 500 at 2239. The consensus for 2017 is that:
- Inflation will rise from the current 2% annualized
- Interest rates will continue to rise, with the Fed raising rates perhaps 3 times this year
- The dollar will remain strong, depressing the value of overseas earnings and promoting imports over exports
- A combination of deficit spending and new spending on infrastructure COULD enable the US economy to grow faster than the 2% annually of the last 8 years.
- Wages will rise as labor markets tighten
- Earnings in general will rise, particularly if corporate taxes are lowered
From year end through July 14th, the S&P 500 made 24 record highs and currently gains 9.85% YTD, so already above the most optimistic forecast at the start of the year.