At the Jamaica Stock Exchange conference last week, in a presentation entitled “Boom, Bust and Recoveries”, Oppenheimer’s chief investment strategist John Stoltzfus stated that his target for the US S&P 500 index for end 2018 is 3,000 points.
This was actually initiated on December 8 last year, and is based on a 20.5 times forward multiple of his estimate of 2018 aggregate S&P earnings per share of US$146.
Unlike other moments in his long career (he noted he had been lucky in calling for the current almost nine-year bull market to begin before the end of the first quarter of 2009), he foresaw a continuing period of modest economic growth “no boom, no bust: I’ll take it”, and that stock prices would continue to “grind higher” rather than rising like Icarus, flying “too close to the sun”.
He started by asking the question “How much longer can this last?”, meaning that the bond market has had less volatility even as central banks continued to raise rates. At the time of his speech, stocks had been going up almost every day that month.
Stoltzfus argued that the reasons included “modest” economic growth and “tame” inflation, the latter being due to technology and globalisation (companies can do more work with fewer people). He observed that the JOLTS index in the US spoke to nearly six million unfilled jobs in the US, suggesting that workers now needed to be trained.
Over the last 20 years training departments had been cut, with workers expected to learn on the job, and training was only now coming back into “vogue”.
One of the reasons for the current tight labour market in the US was the opioid epidemic (employers can’t find people to pass drug tests), despite people being available who were willing and able to work.
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