Welcome to the Soothsayer's Ball

Ladies and Gentlemen, the moment you've all been waiting for...

The Sixth Annual IcebergCarwash Stock Market Contest.

The rules are simple.

Using the comments section of this blog post, give us your prediction for the closing price of the S&P 500 Index on December 31, 2014. The contestant who comes closest will win the contest, and possibly win a prize.

In the past, we've set the deadline for receipt of entries at 9:30AM on the first trading day of the year. This year, however, we're going to accept your predictions until 9:30AM on Friday, January 3, 2014.

This will allow our contestants to wait until the first trading day of the year has passed, and, using historical data, attempt to predict the direction of the market for the entire year.

As indicated in the previous post, the stock market generated strong gains in 2013, with the S&P 500 up 29.6% for the year, on top of a double-digit gain in 2012.

What should we expect for 2014? Should we just assume that the market is due to take a step back? Or, will the gains continue in the next year, as the U.S. economy continues its recovery?


I will kick off the process by offering up my prediction. I predict that the S&P 500 will close 2014 at 1950.00, up approximately 5% from this year's closing level of 1848.36.  Despite the recent rise in equity prices, the U.S. stock market appears reasonably valued, so I wouldn't expect a large pullback. For example, while the trailing (or forward) P/E ratio of the S&P 500 is above its historical mean, it is still favorably valued when looking at the earnings yield of the S&P 500 (the inverse of the P/E ratio) and comparing it to the current yield on the 10-year Treasury note. However, a further increase in bond yields -- which has already been happening, and would be expected to continue if U.S. GDP grows at a nominal rate of 3.0% or more in 2014 - could result in something of a rotation back into fixed income, and out of stocks, which could depress equity prices a bit.

Then again, what do I know? I haven't won this contest in the five years we've been running it. 

Good luck to all of our contestants.