An article published yesterday on contains a table summarizing the predictions of Wall Street strategists for the performance of the S&P 500 in 2009. They’re a pretty optimistic bunch, predicting an average increase of 17% this year (with a range between negative 3.2% and positive 44%!). Surely that’s great news for stock investors.

Although the article expresses some skepticism, it doesn’t go far enough. Allow me to point out these Wall Street emperors' lack of clothing, and state what should be obvious:

No one knows where the S&P 500 will finish 2009
No one. Not me, not the strategists at Goldman Sachs (NYSE:GS) or Morgan Stanley, not Fool co-founders David or Tom Gardner, not Ben Bernanke. Not even Warren Buffett. (He'd be the first to say so). No one.

A very basic way to value the S&P 500 would require an estimate for the 2009 earnings of the companies in the index. The following table shows the change in the consensus estimate of 2009 earnings per share (EPS) for three companies in the S&P 500:


Change in Current Fiscal Year EPS Estimate,
Last 12 Months

Bank of America (NYSE:BAC)


JPMorgan Chase (NYSE:JPM)


American Express (NYSE:AXP)


Those numbers suggest there is quite a bit of uncertainty in the experts' estimates, which could easily overwhelm our strategists' rosy prognostications like a tsunami.

You might protest that a lot has happened over the past 12 months and that these companies are in one of the hardest-hit sectors over that period. I'd respond that a lot could happen over the next 12 months, but I’ll accept the argument.

The table below shows the change over the last 90 days in the consensus EPS estimate for three companies in different sectors. No one will say that we weren’t deep into the current crisis 90 days ago -- Lehman Brothers had already gone into bankruptcy.


Current 2009 EPS Estimate

2009 EPS Estimate,
90 Days Ago

Change in 2009 EPS Estimate,
Last 90 Days





ExxonMobil (NYSE:XOM)




General Electric (NYSE:GE)




The changes are smaller, but they remain substantial. Note that all six companies are among the most closely followed in the world.

It can be an interesting and worthwhile intellectual exercise to value the S&P 500 and speculate about its possible evolution over the course of a year. However, the worth is more in developing alternative scenarios and assigning them different probabilities and less about the final number. It’s no more than an intellectual exercise. I certainly wouldn’t recommend it as the basis for investment decision-making.

In the realm of speculative fiction
In investing, it takes thought and effort to make useful statements about what may or may not happen over the next three to five years. A one-year time frame is the realm of speculative fiction.

But as long as we’re speculating, the Wall Street strategists look awfully upbeat to me. Apparently, I’m more inclined to imagine a multiyear slump than they are -- I think a 7% or 8% increase in the S&P 500 would be a great outcome. (For what it’s worth.)

More Foolishness:

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Alex Dumortier, CFA, has no beneficial interest in any of the companies mentioned in this article. JPMorgan Chase and Bank of America are Motley Fool Income Investor recommendations. Intel is a Motley Fool Inside Value selection. The Fool owns shares of and covered calls on Intel. American Express is an Inside Value pick and the Fool owns shares of American Express. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.