All You Need To Know About Where Stocks Will Go Next

2015 was a bad year for Singapore’s stock market. From the start to the end, the Straits Times Index (SGX: ^STI) was down by 14%. 2016 started off on the wrong foot as well, as the Straits Times Index fell to a low of 2,528 points on 3 February 2016, some 12% lower than where it was on the last day of 2015.

Lately, things seem to be picking up. As of the time of writing (2:30 pm), the index is at 2,817 after climbing by 11% from the aforementioned low of 2,528. What’s next for stocks in Singapore?

Short-term guesses are hard to make. Many who have tried in the past – highly-paid and smart investors, included – have failed. Long-term guesses are easier to make, but even then, there’s no guarantee.

So, what can we do to gain a basic idea of where stocks will go from here? We can have a look at the table below. It’s inspired by my colleague Morgan Housel and it shows where the index will be 10 years from now based on various estimates for its earnings growth and valuation.

Straits Times Index 10-year forecast table
Source: SPDR STI ETF; author’s calculations (click table for larger image)

For a window into my method, I’m basing the index’s current earnings figure on data from the SPDR STI ETF (SGX: ES3), an exchange-traded fund which tracks the fundamentals of the Straits Times Index. As of 7 March 2016, the SPDR STI ETF has a price-to-earnings (PE) ratio of 11.89. With the Straits Times Index closing at 2,824 points on that day, the PE of 11.89 implies an ‘earnings’ number of 237.5.

There are a wide range of outcomes within the table above, so it may appear to be useless. But, that’s done on purpose – it speaks to the important point that investing is about evaluating a series of possible choices. So, choose your own adventure from the table above and let me know in the comments section below which outcome(s) you think has the highest probability of happening!

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn't own shares in any company mentioned.