Robert Shiller, professor at the Yale School of Management, reveals
his 2020 target for the S&P 500
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Robert Shiller was on CNBC New
Year¡¯s Eve to make his forecast for the S&P 500 index in 2020. His
best guess is a 1430 level, which works out to 14% price
appreciation over the next ten years, or 1.3% annually. Taking no
issue with the P/E multiple he uses, but only analyzing the earning
forecast, I believe he may be slightly optimistic. He arrives at the
1430 level as follows:
Real earnings in 2020 are
78.20 per share. He is assuming real earnings growth of 1.5% per
year which is the long-term average.
CAPE (cyclically adjusted
price earnings) or P/E10 ratio of 15. This is the 1890-1990
average P/E. He excludes the ¡°bubble¡± years of 1990-2010 which
would inflate the average P/E to 16.
