RealMoney Silver - 360 Degrees of S&P 500 Predictions

360 Degrees of S&P 500 Predictions
By RealMoney Staff
8/21/2007 10:03 AM EDT

Editor's note: In this edition of "360 Degrees," our RealMoney contributors to weigh in on Doug Kass' question on where the S&P will finish at quarter's end and year-end. Read the latest thoughts on this issue and more in Columnist Conversation.
TheStreet.com has always believed that offering a wide variety of opinions and viewpoints -- rather than a monolithic "house view" -- helps readers make better-informed investment decisions. In that spirit, we bring you "360 Degrees," a feature that takes advantage of our varied stable of RealMoney contributors, who offer analysis of stocks and the markets from all angles.

Doug Kass

Put Up or Shut Up
8/20/2007 12:56 p.m. EDT

OK, it's time to take a poll of the contributors on RealMoney: Will the S&P be higher at quarter-end and at year-end from the current level?

Robert Marcin

Fearless Forecast
8/20/2007 1:19 p.m. EDT

Down through September and then up by December.

Justin Ferayorni

S&P
8/20/2007 1:49 p.m. EDT

There is no doubt that economic dislocation has begun, but the extent of it is still unknown in my opinion. I hear both the bear and the bull sides of the argument at this stage in the game.

My gun-to-head prediction: S&P 500 down from here by year-end. If the U.S. subprime contagion continues to impact the economy, I would suspect the multinationals will weather better than most, but everyone is going to feel the pain. I think we'll all be surprised where oil and commodities are trading if this scenario plays out as well.

Jordan Kahn

Doug's Poll
8/20/2007 1:55 p.m. EDT

While I do not expect the market volatility to subside anytime soon, I also believe that a lot of the downside risk has been priced in at current levels.

Also, the extreme readings in most of the sentiment indicators that I follow lend themselves to the notion that we are somewhere close to a near-term bottom.

So I will go out on a limb and predict that although we may dip again in the short term, I think the SPX will be higher both at quarter-end as well as year-end from today's level (let's call it 1435).

Michael Comeau

Taking the Kass Challenge
8/20/2007 2:08 p.m. EDT

Okay, I'll bite. I think stocks are likely to be down from here at the end of Q3 and flat from here at year-end. However, volatility is here to stay, and a lot of individual stocks will do very well. I'll select growth over value as well.

Eddy Elfenbein

The Kass Challenge
8/20/2007 2:37 p.m. EDT

Doug, put me down for higher at quarter's end and at year's end.

It's the safe bet. I think 11ish% earnings growth, plus 4.6% on the 10-year is very good news for equities. We just erased the last seven months, big deal. Since the beginning of 2005, the S&P is only up about 18%.

Let me add to Tony's comments about today's huge move in the 90-day yield. Historically speaking, this is very dramatic. The short yield just doesn't plunge 80-odd points too often. The last time it happened was 25 years ago, which was also good for equities.

Jeff Miller

Kass Poll
8/20/2007 3:59 p.m. EDT

I expect a higher finish for the year. The rest of the quarter looks negative according to our technically based model forecast. This forecast turned bearish at the start of August. I agree with the model. With a Fed ease already expected, the next positive news may not come until the fourth quarter.

What is the appropriate interpretation for the RealMoney sentiment indicator? Is it contrarian?

Aaron Task

Kass Question
8/20/2007 3:59 p.m. EDT

As for Doug's challenge, I say flat to lower by the end of the quarter and higher by year-end.

David Merkel

Doug's Poll
8/20/2007 5:13 p.m. EDT

Doug, that's a tough one. I can justify either side of the argument. I invest in stocks partially because I'm a good picker, and partially because absent war on your home soil, depression or socialism gone mad, stocks tend to do well. But I'm not so good at forecasting the near term.

Virtually every fear gauge in my arsenal is flashing red, but they aren't so good at predicting the short run. I do think there is a lot of room for deleveraging to take place, and that will weigh on credit spreads and the equity market. ARM resets will continue to whack away at residential real estate values and what few residential mortgage-based financials are left.

But high-quality debt yields are a lot lower than earnings yields, and earnings are growing at maybe a 10% rate. Typically, that's a good time to own equities. (And Bob, ordinarily I like what John Hussman has to say, but basing a long article off of a model that fits well, and extrapolating it into the past does not strike me as good statistical practice. I like my own work on the "Fed Model" better. Quick summary of my version of the rule: Buy bonds when BBB bond yields exceed earnings yields by 4%. Stocks otherwise.)

This is a long-winded answer to a simple question, but I'm kinda stuck, so I'm just trying to put forth my reasoning here. I think that by the end of the third and fourth quarters, the market will be lower, and financials more so. I think by the end of 2008, the market will be hitting new records, but the financials will not lead.

But right or wrong on this, I keep running my value strategy. I'm still up this year, even if not by a lot.