Independence Day has arrived. It is the day of reckoning for my S&P 500 forecast. (You can review my last update here which has links to the original post and first update if you are interested.)
The S&P closed yesterday at 896.42 which leaves my prediction as a failure. I was calling for the S&P to trade in the 600-640 range by this time. We hit a low of 666.79 in March and rallied back to current levels. I admit and accept defeat.
The latest version of the S&P earnings forecasts can be found here. The picture is about the same as it was in our last update on Memorial Day. The earnings forecast for 2009 now sits at $55.61. The trailing twelve months at the end of June yielded earnings of just $40.15 which implies a huge trailing P/E ratio of 22.9. It is difficult to say whether this is too optimistic at this point or not.
However, despite all the talk about the economy being in the early stages of recovery, I think we are still in for some tough times. California is bankrupt, commercial real estate is about to implode, the housing market has not yet hit bottom, huge volumes of Alt-A and other adjustable mortgages have yet to reset, and we continue to dig ourselves deeper into debt. This is not a typical recession.
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