Earlier this week First Trust published their Monday Morning Outlook that contained an article from one of my favorite economists, Brian Wesbury. For 2019, Wesbury is predicting a 25% increase in the Dow as well as the S&P 500. These predictions are based on Wesbury’s Capitalized Profits Model which shows the S&P 500 still being dramatically undervalued with continued potential for growth. This is a very interesting viewpoint and is certainly a good argument towards staying invested during volatile markets, of which we are no stranger to after of 2018.

Please enjoy the article below:

 

First Trust: “Dow 28750, S&P 3100”

Early in 2018 we said the US economy has gone from being a Plow Horse to Kevlar. Nothing that has been thrown at the economy since – neither trade conflicts nor tweets, not higher short-term interest rates nor the correction in stocks – is likely to pierce that armor.

A year ago the economic consensus was that real GDP would grow 2.5% in 2018. And yes, that was after the tax cuts were passed. By contrast, we were more optimistic, projecting that real GDP would be up 3.0% in 2018. If we plug in our
forecast for 2.0% real GDP growth in the fourth quarter, the economy will have grown 2.9% for the year. If, instead, we use the Atlanta Fed’s estimate of 2.7% for Q4, we’d get 3.1% for the year. Either way, we just about nailed it.

Now, the same consensus that a year ago suggested the economy would only grow 2.5% in 2018 with the tax cuts is saying the economy is going to slow down to a pace of 2.3% in 2019, in part because of the supposed reduction in stimulus related to those very same tax cuts.

Once again, we’re not buying it. The benefits to growth from having a lower tax rate on corporate profits and less regulation are going to take years to play out. Companies and investors around the world have only begun to react to the US being a more attractive place to operate. As a result, we’re forecasting another year of 3.0% economic growth.

Click here to continue reading this article.