First Update On S&P Forecast

One month ago, I provided my predictions for the S&P 500 which can be reviewed here. According to data from S&P (available here in Excel), with 85% of earnings reports in for Q4 2008, the year did not end well. No surprises there. The estimated earnings for the S&P is coming in at $5.77. That puts the earnings for 2008 at $55.37. That is about $10 less than what was forecast for 2008 just one month ago. The current estimate for 2009 is $67.55. One month ago, I was predicting a range of $55-$60 while the S&P was reporting a bottoms-up forecast of $81.80.

While the market had a rough month in January, it did maintain levels above the lows set on November 20th. So, my first prediction milestone, Valentine's Day, has come and gone without new lows. However, I still think we are well on our way to my target range of 600-640 based on the earnings estimates. My predictions from just one month ago have already turned out to be much better than what was provided by S&P. I think it could get uglier than I thought.

The following chart shows the quarterly breakdown of earnings with annualized totals. The values from Q4 2008 on are estimates (from S&P).

Notice the optimism still coming from the estimates beginning in Q3 of this year. In fact, the rolling 12-month estimates throughout this year are near my target range (mostly due to the horrible Q4 2008 numbers). I still believe that the earnings will come in lower than these numbers for each and every quarter in 2009. I also believe that we will see the P/E ratio decrease during the same time.