For the last time, let's recall the prediction we made four weeks ago, back on 7 March 2016, when we explained why were going to discard our standard model's projections of a rough ride for the S&P 500 for the rest of March 2016:
That's also true for the projections for the remainder of March 2016, which suggest that stock prices are in for a rough ride before recovering. However, that apparent trajectory is really an artifact of the historic stock prices we use in our model to project their future trajectory, and as such, it is an echo of past volatility, which means that our model will be less accurate until that echo subsides....
So can we predict where stock prices are likely to go next?
Of course we can!... Provided investors keep their forward-looking focus on 2016-Q4 in making their current day investing decisions, we can expect that the S&P 500 will continue to track largely sideways (plus or minus 3% of their current value of just under 2000), through the end of March 2016.
Mathematically, with a base value of the S&P 500 of 2000, that plus or minus three percent means that we were predicting that the S&P 500 would range between 1940 and 2060 from 7 March 2016 through 31 March 2016.
The chart below visualizes how well our prediction actually fared:
We'll have some more comments about our prediction at the end of this post. In the meantime, for historical reference, here are what we considered to be the main market driving news events for the fifth week of March 2016.
- 28 March 2016:
- Atlanta Fed sees first quarter U.S. GDP growth of less than 1 percent - If you pay attention to what we post about dividend cuts, this news is no surprise.
- Wall Street ends flat after choppy session
- Global stocks rise, dollar falls as odds wane for near-term rate hike
- 29 March 2016:
- Fed's Williams urges U.S. central bank to stay on track with rate rises - we feel sorry for the San Francisco Fed president, because his boss had other ideas....
- Wall Street rises as Yellen pleases investors - Dammit, Janet! In one fell swoop, Fed Chair Janet Yellen undermined her minions work to focus investors on 2016-Q2 as the most likely time for the Fed's next short-term interest rate hike.
- Fed's Kaplan says central bank should raise rates gradually and cautiously - The Fed's Kaplan of course had the benefit of making his forward guiding comments after Yellen spoke....
- 30 March 2016:
- Fed's Evans sees high hurdle to April rate hike; June possible: CNBC - one of the Fed's leading minions strikes back. Impotently, we might add....
- Wall Street plows higher as anxiety falls to seven-month low - It looks like Janet Yellen's dollar weakening and new QE-hinting statement on Tuesday, which completely contradicted the scenario that other Fed officials had been trying to sell, prompted stock prices to rise as her statement succeeded in fully focusing investors on 2016-Q4, with the market's typical noise and volatility taking it above the 2060 ceiling we had predicted would apply for the month. This was the only day we missed in our prediction back on 7 March 2016 for where stock prices would go through the end of the month.
- 31 March 2016:
- Fed's Evans nods at possible June rate hike - some people just don't know when to quit....
- Fed's Lockhart sees 'scope for three' rate hikes this year: Nikkei - while others don't know when the game has been called.
- Feeble finish to a tempestuous quarter on Wall Street - what do they say about the weather in March? In like a lion, out like a lamb? In 2016, that was just as true for stock prices!
- 1 April 2016:
31 March 2016 marked the end of our 7 March 2016 prediction for the range in which the S&P 500 would close on each remaining day of the month. Overall, we were right on 17 out of 18 days and on the only day we were wrong (thanks, Janet!), we missed the mark by 3.95 points, on a day where the market closed at 2063.95.
We used to keep track of our prediction accuracy, but we stopped after doing it for three years back in 2011. Keeping track that is, not being impossibly right so often. Even with our policy of not including near misses like the one described above - we've never kept score the way that they do in games of horseshoes, or for that matter, the Wall Street guru game.