S&P 3000: Why Stocks Index Could Jump by 2020

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Sept. 2 (Bloomberg) -- In today's "The Open," Gina Martin Adams discusses Adam Parker’s prediction of the S&P reaching 3000 by 2020 and her investing strategy. She speaks on Bloomberg Television's "In The Loop." (Source: Bloomberg)

I want to take somebody else's call.

Something julie pointed out this morning.

By 2020 come in six years, you will see 3000 on the s&p. he said equities should benefit from a scenario where the probability of a cycle peak remains low for some time.

3000 by 2020. what do you think?

Kudos to him for having the boldness.

I certainly don't have that degree of boldness third equities generally go higher.

You can trendline the progress and inequities so far.

The trendline continues and you get to 3000 pretty easily.

Whether or not there will be disruptions in the near-term is pretty tough.

That's why you tend to have something of a 6-12 month outlook for stocks.

He said, it would be the peak cycle scenario.

3000 would be the peak.

It is contingent on getting 6% profit growth per year.

Which is not a very high bar.

That is average.

3000 means no adjustment.

The current rate at 17 times.

I don't want to judge.

I can only speak to my own.

I'm not saying it's unreasonable.

It certainly is a reasonable forecast if you're willing to put your neck out there for five years down the line.

Who was to say where pe is going to go.

We are in the business of trying to navigate the market over shorter terms.

What we tend to do is focus more on sector strategy and try to outperform the benchmark and a short period of time.

You want to hold stocks for a long-term.

Maybe that's his point.

They are a bit overvalued here in the short run.

When you're thinking about economic growth, improvement come equities should perform relatively well.

Let's talk about the shorter-term.

You talked about pe versus the yield curve.

The s&p 500 yield curve.

We have a chart we looked at last week.

It shows them converging and yield curve versus predictions has been narrowing.

We might actually see valuations come down a little bit.

Can you walk us through that?

That is what normally happens in the second half of an economic cycle.

We are in a point where the set is going to start to increase short-term interest rates.

What has happened in the last few economic cycles is the yield curve has flattened.

So far, the sealed the near, the curve has flattened.

If the yield curve flattened, what happens.

For the market broadly, it does not mean a whole lot.

For pe specifically, it usually means contraction.

You have seen the pe on the index all.

-- fall.

We become more dependent on earnings growth.

You should see earnings growth accelerate to offset that pe compression.

You should see sectors start to migrate returns relative to the pace of earnings growth.

Earnings become more important.

It has been all about pe expansion for the last 18 months.

Pe has expanded tremendously.

We should see those roles reversed.

You intend to look at the cyclicals.

You feel like health care -- it seems so overextended from that spread between the two -- the five-year and the 30 year.

This is where we are sticking your neck out.

Historically, you do want to migrate toward a more cyclicals sector.

Health care has traditionally traded us something -- we are saying, look, health care might be an outlier.

The fed starts to increase interest rates, you would normally want to be in the mid- to later state cyclicals.

Health care is going through an anomalous experience.

In history, and has shown one of the slower growth rates on the index.

It tends to perform well as others are growing softer.

In this environment, health care is the fastest-growing sector.

This text has been automatically generated. It may not be 100% accurate.


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