IB Net Payout Yields Model

Could the S&P 500 Hit 1,700 This Year?

Of course not. Why would the market ever breakout to new highs? Aren't the financial markets headed for collapse?

According to Laszlo Birinyi, president of Birinyi Associates, in this CNBC report the possibility really exists for a further 24% increase this year to 1,700. The good news is that just about every market pundit has blown off this view that the possibility increases. A 35% gain in the markets is far from unprecedented especially when the year began with sub par valuations.

According to Birinyi, this is just a continuation of the bull market began back in 2009. According to him, this run looks similar to the 1982 and 1990 runs.

Neither is likely to be repeated, but for any investor to dismiss the possibility would probably be reckless. Especially considering any break of current levels ushers in a return to old highs in the 1,500s. A further break of that would likely lead to nice gains beyond the old high leaving 1,700 as a likely stop.

Laszlo has been bullish for a while and was likely very wrong about the outcome in 2011. Maybe he was just early one year.

Clearly our investing thesis doesn't consider this as a likely outcome. Though when looking at numerous stocks trading with forward PEs in the 5-7 range one can't wonder what the market would do if these stocks jumped to more normal levels in the 10-14 range.

As long as the pundits ignore these calls, they become a lot more likely to occur!

Disclosure: No positions mentioned. Please review the disclaimer page fore more details. 


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