1) Start with your S&P 500 price target. This one is easy, just assume that the market will go up the same as the historical average return, 9-10% (even though this basically never happens in any given calendar year).
2) Find out what everybody else is saying about interest rates. They have to go up, right? Ok, say that. Say something safe like the 10-year will go up 1.5%. QE is over, so this has to be a home run (just like last year!).
3) Decide if you want to either project the recent past into the future (US stocks will continue to lead the way) or bet on mean reversion/valuation (it’s time for international stocks to lead). Either is very easy to defend in just one or two sentences.
4) Say some stuff about a sector and why it will either keep doing well/poorly or turn around. Again, doesn’t really matter why as long as you have a reasonable defense. A good narrative about tech companies or biotech or how financials will do great with higher interest rates will buy you a lot of authority here.
5) For economic projections, just stick with the low-but-positive global growth story. This is the safest bet you could ever make. Strong dollar? Check. Low global inflation? Check. Deferred activity by the US Fed? Check. Just make sure you attribute this theory to politics or oil prices and be sure to throw in some “headwinds” just in case you are wrong. Gotta have an out.
6)If you’ve been calling for a market crash for the last five years, by all means, don’t stop now. QE is over! Shiller CAPE is still high! Inflation is just around the corner! The market was just propped up by monetary policy! Eventually you’ll be right and pick up a few billion in AUM that will then underperform through the next recovery.
7)Whatever you do, don’t acknowledge that the market is an extremely complex system with inputs so numerous there is no realistic way to predict next year’s events or how the markets will react to them.
Bason Asset Management 