6/8/2014 Since 1972, the S&P index has progressed along an average rate of increase of 6.55% per year. When the current rate pushes that number over 7%, it is an indication that the market is overheated, and beginning to “bubble”. Right now, the nominal value should be a bit over 1700. However, the 7% level is near 2060. Our interpretation of this is that the markets are operating optimistically, but not overly so. By the end of 2014, the nominal value would be 1760, and the 7% level would be 2160. At the current point of 1920, there is 200 points (+10%) of headroom for the market to move within, and a floor 160 points downward (-8%). As long as general business and political conditions remain stable, we would expect the S&P to end the year above where it is at this beginning of June. At the end of the third quarter, we’ll review this situation once again.
