Trump fan’s bullish stock market forecast makes him a winner – STLtoday.com

Rick McBride was bullish when most people weren’t, and being optimistic made him a winner.

McBride, of Hartville, Mo., submitted the highest stock market forecast among 32 people who entered my 2017 Economic Challenge.

He actually missed the year-end Dow Jones industrial average by more than 2,000 points; he predicted a 14 percent gain, and the index rose 25 percent. In most years, such a miss would put a person out of contention, but going into 2017 the experts, and most of my readers, were expecting a gain in the low single digits.

McBride’s bullish stance stood out, and he was close enough on the other economic variables in the contest — gross domestic product, inflation and unemployment — to come out on top. I’ll send him a package of Post-Dispatch merchandise prizes that he can display as evidence of his forecasting savvy.

McBride told me via email that his predictions were based on “mainly experience” plus a lot of reading. He said two things made him optimistic about stocks a year ago: He saw the housing market starting to improve and, as a fan of Donald Trump, he thought the presidential transition would be good for business.

McBride also correctly predicted that inflation would rebound; the Consumer Price Index jumped 2.1 percent last year after rising just 0.1 percent in 2015 and 1.3 percent in 2016. His intuition on inflation was based on rising commodity prices and “never-ending government spending,” McBride said.

As we close the books on the 2017 contest, a few other forecasts deserve honorable mention. Second-place finisher Greg Marston also predicted a double-digit stock market gain, and he, George Bennett and Vincent Garozzo all nailed the 2.1 percent inflation reading. Dave Hohenstein, Robert Orr and Bill Westmeyer managed to hit last year’s GDP increase, 2.5 percent, on the nose.

In my 2018 Economic Challenge, more readers submitted bullish double-digit forecasts for the Dow, but more than one-third of entrants think stocks will finish the year lower. The median prediction is for just a 3 percent gain.

McBride, our most bullish contestant a year ago, has crossed over to the bear camp. He thinks the Dow will top out at about 27,000, which isn’t far from Monday’s close of 26,436, but then take investors on a wild roller coaster ride, tumbling as low as 15,000 before rebounding to between 22,000 and 23,000 at year’s end.

McBride thinks the Trump economy will continue doing just fine, with tax cuts and a strong manufacturing sector helping boost GDP by 3.4 percent. That would be the economy’s best year in more than a decade.

The economy is not the stock market, however. McBride thinks that valuations have become “crazy” and that sometime this year investors will rethink how much they’re willing to pay for stocks. According to FactSet, the Standard & Poor’s 500 trades at 18 times this year’s expected earnings, well above the 10-year average of 14 times.

It’s interesting to imagine how our tweeter-in-chief might react to a sharp stock-market correction. Would he blame it on the Democrats? Would he cheerlead for a quick bounceback, or maybe use the market’s slump to justify more infrastructure spending?

Down in the Ozarks, there’s at least one Trump fan who thinks we’re about to find out.

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