Latest SP500 Forecast

Below is the latest 12 month S&P 500 Forecast (as per 2/21/2016). The same type of modeling approach (as was used for the Dow constituents) was also utilized here. The basic outlook is that the S&P will rally until the summer and experience extended weakness as we near election season and the end of the fourth quarter. Key inputs to this forecast include the slope of the yield curve, trends in industrial production, market sentiment, and a selection of employment indices. Most of the indicator factors have correlations with leading 12 month returns that exceed 60%. The mean absolute error of the system of models is ~5.8%, as the average of cross-validation (7-fold) errors.