S&P 500 Forecast Value-based

Long-term (90% accurate) forecast of US stocks. In the short-term the stock market was better predicted by trend rather than value, but in the long-term valuation was the best indicator. To get as high as 70% correlation the short-term forecast was at least three months into the future and had the same trend as the prior three months. In the long-term, investor allocation determined stock returns, but it did not enable market timing. The ten year forecast was inversely proportional to investor allocation to stocks. Investor allocation had 90% correlation with subsequent ten year stock returns. (http://www.philosophicaleconomics.com/2013/12/the-single-greatest-predictor-of-future-stock-market-returns) Since the worst declines occurred during recessions, this app uses unemployment claims data to give early warning of recession. The sim portfolio shows how this strategy would have performed compared to the stock market over the past 35 years. This app was not designed for day-traders, but it was optimized to warn of long-term declines that last for more than three months and may continue for years. This app is for informational and educational purposes only and is not intended as advice to buy or sell securities.

You can compare the 10-year forecast with 5-year, 3-year, 2-year and 1-year forecast to see how the shorter term forecasts have less correlation. The 1-3-year forecasts have no predictive utility as their correlation is about 50%. They do serve to show the futility of trying to make short term predictions.

You can uninstall this app if you don't understand it, but please don't give a bad review if you don't understand it. If you need more explanation of how it works, you can send me an email at [email protected].