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Throwing Elbows

Updated: Jul 20, 2023

This is stock market analysts’ favorite time of the year. As we all know, opinions are like… elbows. Everybody has ‘em.

And this is the time of year when everybody has a forecast for the coming year. What better time to show your… elbows? Unfortunately, when taken as a collective work, there isn’t much to glean from all of the pontificating, which is pretty normal. In fact, I’ve gotten used to throwing out all of the Motley Fool and Seeking Alpha stuff along with everything I’ve ever seen on Twitter or in the blogosphere, and it still doesn’t clear the picture much.

Let’s say we narrow it down to “the experts.” We have spent the last few weeks reviewing forecasts from Bank of America, Goldman Sachs, JPMorgan, and Morgan Stanley, and let’s just put it this way: There is no consensus. On anything.

JP Morgan and Goldman are bullish. B of A is bearish, and this year’s super bear award goes to Morgan Stanley.

These forecasts are a cornucopia of guesswork. Or maybe it’s not guesswork at all, and these people are just so smart that their opinions serve as a de facto proxy for “all known information,” which we know the market has already priced in. Regardless of where you stand, I will say with pretty high confidence that none of these forecasts will be correct.


Among these big four investment banks, the models produced by Goldman Sachs and JP Morgan are the most bullish. Goldman predicts the S&P 500 will climb to 5,100 (up approximately 11.5%) by the end of 2022. Similarly, JPMorgan is calling for 5,050 on the S&P. While Goldman Sachs researchers are confident retirement accounts will see another bounce, they acknowledge 2021 headwinds like decelerating economic growth, a tightening Fed, and rising real yields.

Meanwhile, Bank of America thinks the stock market will essentially be flat next year. B of A forecasts that the S&P 500 will finish 2022 at 4,600, which would make for a paltry 0.7% gain. They expect that most of that gain will come from small-cap stocks and that large-caps will encounter a period of lackluster performance. We disagree; I’ll bet dollars to doughnuts that the Nasdaq 100 is up more than the Russell 2000 in 2022.

Of the four models, Morgan Stanley is clearly the most bearish. The investment bank foresees the S&P 500 finishing next year at just 4,400 points— a 3.9% decline. It’s interesting to note that 4400 is right where the index’s 200 day moving average was a couple of weeks ago when they came out with the forecast.


We continue to operate under the assumption that earnings should be reasonably good through 2022 but that the stock market will assign a lower valuation multiple to those earnings due to an increase in interest rates. Shifting policy at The Fed (and other central banks) means that the training wheels are coming off, and after 20 months of unprecedented support from both governments and central banks, the party is winding down.

We interpret the recent flattening of the yield curve as an indication that we’re likely to get a couple of interest rate hikes over the short term but that longer term growth will slow and thereby decrease inflationary pressures. That jives more or less with Goldman’s rationale; they expect a core inflation rate of 4.3% in the U.S. at the end of this year, followed by a drop to 3% in June 2022 and 2.15% by December 2022.

At any rate, my elbows (and that’s all they are) are saying that the S&P 500 will finish next year at 4900, but I think that it’s how we get there that will be interesting. We still have plenty of time in 2021 to test the index’s support at 4400 before year end, so our target represents an 11% gain from where I think we’re soon headed. Of course, the stock market has a wonderful way of making fools out of the most people possible, so what if we’re wrong? From a portfolio management perspective, we continue to recommend buying dips while not chasing breakouts. Additionally, we continue to emphasize diversification; throwing darts this year may prove to be even more difficult than usual.


The list of our most read Insights columns of the year is really interesting to me. Our team voraciously processes information on a wide gamut of financial issues, not just portfolio management, and our top four reads of the year illustrate that point, which is gratifying. We went from a piece about the basics of goal-based financial planning to a conversation about sales practices in the financial services industry to more of our wickedly on-point market analysis to the announcement of my investment firm’s switch to a new broker dealer. It was like the big four’s forecasts for the S&P-- all over the place.

  • Our most read piece of the year was Those Destined to Hang Need Not Fear the Water, in which we recommended cyclicals and commodities. Timely stuff.

  • Our second most read piece was Here We Go, which was basically my firm’s coming-out party upon being acquired by Aegis Capital.

  • Our third most read piece was Get Yours… Today in which we explored various rationales used to plan financially for a life that is precious, unpredictable and altogether too short.

  • Our fourth most read piece was The Merrill Lynching of Financial Services where I went on a rampage that hit on everything from financial services industry standards to emergency bond buying programs to debt monetization.

In the spirit of the holidays, I’d like to express my firm’s sincere thanks to all of you-- our clients, associates, partners and readers. We are grateful for your continued support, feedback, and engagement over these last twelve months. It is our belief that through rigorous research, intellectual honesty, constructive debate and a good deal of humility, we can work together to turn your goals into reality.

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