Overenthusiastic S&P 500 Price Targets: Is The U.S. Still A Good Investment Destination?

The WSJ had an article about SPX price targets from brokerage firm strategists coming under scrutiny, or maybe fire is a better word. You probably heard that BofA fired its equity strategist about ten minutes (slight exaggeration) after he reaffirmed his year end target of 1,400. Some of the usual suspects are also mentioned for either sticking to their guns or giving up the ghost.

Many investors like to hear SPX price targets, so many financial firms oblige. I used to do a little more here myself with picking some number that was away from consensus that tried to incorporate some aspect of where I thought we were in the cycle. I was close to right a couple of times and too pessimistic a couple of times.

The simple issue here is that these forecasts tend to be wrong, a lot. We've gone over some of the dynamics of the perma bulls, the threat they pose and some of the conflicts they may have in "needing" to be bullish so it is somewhat surprising that BofA got rid of someone who appeared to be too bullish.

Price targets notwithstanding, if you zoom out a little, the US is a destination where the sovereign debt was downgraded, there is a demographics problem, the government is not functional, growth is below trend with no visibility for improving, there is too much debt and there might be a serious problem (I think there is a serious problem) with liabilities to retirees and future retirees.

If this description were about another country you would quickly move to research another investment destination.

Anyone capable of being able to think in terms of several years at a time (or even a little longer) would be better served looking to longer term trends that have a reasonable basis for working in the future or continuing to work as they have in the past. Obviously not all previous winners can continue to work out well.

Consider the above issues with the ! US (and any others you care to add) and ask yourself what is the simplest outcome. My answer to that question is not a Schiffian (as in Peter Schiff) implosion but instead an ongoing muddle where average growth rates are well below what we think of as being normal and continue being far inferior to many other countries in the world.