“It’s that time of the year again!
It was a tough task repeating the success of my surprise list for 2011 over the past year.
This is particularly true since my most important surprise (No. 4) in 2011 — namely, that the S&P 500 would end the year at exactly the same price that it started the year (1257) — was eerily prescient. As well, in 2011 I basically nailed that the trading range over the course of that year would be narrow (between 1150 and 1300).
As we entered 2012, most strategists expressed a relatively sanguine economic view of a self-sustaining domestic recovery and an upbeat corporate profits picture but shared the view that the S&P 500 would rise but only modestly.
By contrast, I called for a much better equity market — one capable, in the second half of the year, of piercing the 2000 high of 1527. As it turns out, the S&P 500 breached 1480 to the upside in the fall — or about only 3% less than the 2000 peak. (In October, I concluded that the S&P 500’s fair market value was 1415, and the S&P closed the year just 10 points higher than that figure.)
Before reviewing what else went right in my surprise list for 2012 (and what went wrong), I wanted to give some historical perspective on the lessons of the past, on the role of the consensus and what I am trying to bring to the table in the construction of the surprise list.