Why this analyst sees 15% upside for the S&P 500

Bullseye American Ingenuity Fund Portfolio Manager Adam Johnson joins Market Domination Overtime to explain why he sees the S&P 500 climbing to 8,800, representing roughly 15% upside from current levels. Johnson breaks down what could drive the market higher.

How would you broadly characterize valuations here?

I'm comfortable with it because of the growth. So, the S&P 500, I think we will see earnings of $400 in aggregate, right? If you add up the earnings of all 500 companies, I think over the next four quarters that number will be $400.

And you say to yourself, well, um, what sort of PE multiple could we put on that? And I should note that typically in a bull market, you have a PE multiple of anywhere from uh 18 times to 24 times.

So let's put the higher end. Let's put a 22 PE multiple on $400 of earnings. That gets you to 8800 on the S&P 500. Well, right now we're at 7700. So, by my way of looking at the world, I think there's another 15% upside from here. And again, it's because of the earnings growth.

Let me ask you about another big thing I want you to take on. Uh, oil. We did have a a pretty big headline drop from the journal today. They're reporting the US sending a third aircraft carrier, up to 10,000 more troops to the Middle East.

oil a little higher here. I'm looking at uh see WTTI is at 93, Adam. Can can the economy and the market, can it handle 90 $90 oil?

Yes. And, you know, I mentioned the historical context with bonds. Well, uh I can do the same for oil. Uh slightly different numbers, but uh hear me out. From um 2010 until 2015, oil averaged 85 bucks. As you just pointed out, it's 93 today on the set line. So a little bit higher than that. But again, for five years it averaged, uh, oil averaged $85.

Well, inflation at that time, for those five years was only 1.7%. The economy grew 2.4% and the average return for the S&P 500 uh was 13%. So, just as we've proven to ourselves, historically, that we can live with uh bond rates above 5%, um we have proven to ourselves that we can live with oil uh for five years at 85 bucks. Uh the rest of the economy can continue to grow, inflation um can be held at bay, and stocks can go up.

Uh, so, honestly, even though we talk a lot about bonds and oil and oh my gosh, isn't it horrible and what a terrible headwind, the, you know, stock market's at all-time high. So, the stock market's telling you, you know, yeah, you people on TV can talk about it all you want, but, you know,