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  One Man’s Take on the Potential Upside of the S&P 500
Posted Under: Broader Stock Market
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Past Performance is no guarantee of future results.

View from the Observation Deck

  1. The average recovery period from a bear market in the S&P 500 is 39 months. (InvesTech Research)
  2. The S&P 500 has never failed to recover.
  3. The most recent bear market in U.S. stocks bottomed on 3/9/09. So we are a little more than 31 months into the recovery  as 10/19/11. 
  4. As of the close of trading on 10/18/11, the S&P 500 would need to rally 27.7% to reach its previous high  of 1565.15 on 10/9/07. Hence recover. 
  5. While we would not be so bold as to say we could experience a rally of the magnitude of 27.7% over the next 8 months, we can offer perspective.
  6. From 1926-2010, the S&P 500 posted a calendar year total return that exceeded 27% a total of 20 times (see chart). Nearly 1 out of every 4 years. 
  7. We believe that a rally can occur providing we get a meaningful debt stabilization package for Greece and/or others from the European Union.
  8. We would hope that such an announcement will come soon. 
  9. The forward-looking P/E on the S&P 500 was 12.23 as of 10/18/11. (Bloomberg)
  10. Stocks, in our opinion, are inexpensive on a historical basis and offer the potential for significant upside.

Posted on Wednesday, October 19, 2011 @ 2:36 PM • Post Link Share: 
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These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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