"Goldman: Stocks Will Tank Then Surge To All-Time Highs Next Year"

“We forecast S&P 500 will reach 1575 at year-end 2013 based on our new 2014 EPS estimate of $114 and a fair value P/E of 13.9X,” http://www.businessinsider.com/goldman-sachs-2013-sp-500-target-2012-10

There is a Bloomberg article that cites unanimous agreement from 5 firms that SPX will reach a record in 2013 - all predictions are close to 1600. This seems very aggressive! People drinking their own Kool Aid? I can’t find this article on normal internet though…

There are some catalysts:

  1. Fiscal cliff probably won’t happen. Does anyone really believe that the two parties won’t strike a deal after the election?

  2. Presidential election will be over. If Romney wins, stocks will go up. If Obama wins, stocks will be down in the short term. However, eventually people will realize he’s not the anti-Christ, so stocks will go up.

  3. Euro Zone crisis might move towards a resolution. Or slightly worse case - they might get some clarity on which countries get kicked out. The reduction in uncertainty alone might be good for markets.

  4. Fed will continue stimulative policy - definitely past 2013. $40 billion/month MBS purchases will continue.

Overall seems pretty optimistic, but not crazy.

I think they are also counting on deleveraging…capital flowing out of bond markets into equities

I’m more bearish now than I have been in a while. Went to cash with a good chunk of change a week ago. Probably won’t do much until after the election. Seems like a lot more downside risk at the moment.

I’m content to watch for a while.

Historically, November-April is the best 6 month period for equities.