I. From Caution to Buying Opportunities
On September 15, we advised our readers to "Proceed With Caution." In that note, we pushed our year-end S&P 500 target of 8,400 to mid-2027 and lowered our 2026 target to 7,900. Our concern wasn't earnings. We maintained our 2027 S&P 500 EPS forecast of $425 but lowered our year-end forward P/E forecast from 19.8 to 18.6.
Why? Our worry list was getting longer: geopolitical conflicts, rising bond yields, domestic political uncertainty, and concerns about the AI trade. We reckoned that these risks were increasing and would depress valuations (FOMO) despite the ongoing strength of the economy and fabulous earnings momentum (FEMO).
We reiterated our caution on October 14. On October 24, we observed that buying opportunities were starting to emerge, but better ones were likely after the midterms. On November 2, we warned that a Democratic sweep could deliver a cold shower for Wall Street. The Nasdaq plunged on November 5. That evening's QT was titled, "We Promised You Buying Opportunities After The Midterms." We concluded that Thursday's selloff was the buying opportunity we had anticipated.
