We have not commented as often this year about the market volatility, because our stance has not changed since the end of December. At this moment, we still do not see a recession, nor do we see a surge in economic growth. Our writings in December explicitly said that the valuations in the markets seemed too high for the tepid growth rate. We simply did not see the justification for a 10% return on equities that is the general consensus on the street for 2016.
The street’s guesstimate for the year-end S&P 500 target, has been lowered to 2175 from 2250. This is 17% higher from current trading levels. In December, we indicated that the S&P 2016 target would be closer to the 2015 close of 2040. This should hold true, barring any unforeseen recession , war, terrorist attack or anything else. If companies have an earnings recession, then the S&P 500 targets would be lowered.
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