My personal outlook for 2018 is a best case of 3450, a worst case of 1800 and a most likely of 2650. I based this range on SPX pricing from as early as 1950 with the top representing an 8% CAGR and the low representing a 7% CAGR. Trading within this range only represents normal movement in my view so trading outside of it wouldn't suprise me if some significant market event or discovery were to happen.
The energy sector remains one of my favorites due to its superior value as compared with the market leading technology sector at the moment. The thematic collapse of energy due to the discovery of fracking seems off in some way to me. Cheap fuel is finding its way into many industries and as those industries develop a dependency the price should begin to rise consistently going forward.
The emerging markets sector is another one of my favorites for the same reasons as with energy. So many of these countries are geared towards providing energy and as energy recovers so will these markets. Since a lot of these economies mismanage their debt there should be a levered effect as they recover due to the repricing of that debt.
The biotech sector is clearly suffering as collateral damage from the political wars of 2017. This political shortsightedness should have no long lasting effects on this industry and I expect a full recovery going forward. The repricing of biotechnology due to politics is probably the best value gift from 2017. With the US popluation growing older every day this sector should be one of the most important over the next several years.
I still haven't been able to figure out bitcoin and I've already watched two documentaries about it! Clearly having missed the boat on this investment the only question left is what to do going forward. I think that the next best option to avoid being completely left out is to find a suitable hedge. The semiconductor industry appears to have increasing sensitivity to developments in the cryptocurrency space and would provide for a great diversified proxy investment. If ultimately, blockchain or bitcoin fail to live up to the hype the semiconductor industry will certainly live to see another day. I'd be patient, however, and wait for a deep pullback before putting anything on in this space.
One of the most interesting phenomenons in 2017 other than bitcoin has been persistently low interest rates. Growing wealth disparity combined with these low rates confirms that no one is invested in this bull market. This also explains why terrible news has only has a temporary effect...the supply of buyers are now overwhelming the supply of sellers. I see limited risk to the downside until we start seeing rates north of 8%.