Naturally, the most common reaction is one of ridicule, given that the PSEi ended September 2025 at 5,953.46 or 13.6 percent lower than where it was 10 years ago.
Hindsight is 20/20
It is easy to make fun of it now, because hindsight is always 20/20.
But keep in mind that when that forecast was made 10 years ago, the stock market had been bullish for six years and the overarching sentiment was one of optimism.
Back then, nobody had any idea that in just a few years, we would elect a government that is willing to nullify active congressional franchises for water distribution and broadcasting companies.
Nor did we have any idea that there would be a global pandemic that would change the way we work and do business. There were no clues that we would face the biggest post-war inflation crisis and interest rates would rise to historic highs.
It is easy to say now that “we should have seen it coming” because we have already lived through it.
The only thing that’s constant is change
Analysts make forecasts using whatever information is available and assume that current trends will continue unless an external force stops it – yes, exactly like Newton’s First Law of Motion.
If one would draw a straight line from the start of the bull market in 2009 to where it was in 2015, then project this line forward to 2025, the index should indeed be somewhere between 16,000 and 17,000 by now.
But the thing is, external forces are constant and occasionally we get an external force that is strong enough to alter everything beyond our wildest expectations. That is why nothing is certain in the long run, and that is also why forecasts are constantly changing.
Index target downgrade
Uncertainty is also present in shorter timeframes.
From today’s vantage point, our year-end 2025 index target of 7,212 released back in August seems laughable.
Back then, there were no Senate hearings and the flood control corruption scandal seemed like it was just background political noise. But now, it seems that it will impact the broader economy through slower government spending and less foreign direct investments.
Taking that new information into consideration, we have lowered our base-case index target down to 6,757 with a worst-case scenario target of 6,573.
Note that we refer to it as a “year-end index target” but that is actually a misnomer.
These index targets are simply the corresponding index value of the maximum valuation ratio that we think investors would be willing to accept given the current geopolitical and economic environment.
Case in point, last year we set our index target at 7,614. And not to be all “I told you so” about it, but the index did hit a high of 7,604.61 on October 7, 2024, implying that investors really are willing to accept those valuations.
Unfortunately, it was all downhill from there as Donald Trump’s ascent to power threw optimistic forecasts out the window.
Are we addicted to optimism?
As the title of this column states: Analysts are people too. We like to think that we are right more often than not, but our forecasts are not prophecies. We cannot say when the market or a stock’s price will hit a certain level.
What we can estimate is how much something should be valued based on information that we currently have and using quantitative proxies for abstract and unquantifiable concepts like investor sentiment and risk appetite.
If it seems like we are perpetually bullish, it is not because we are blinded by optimism or wanting to generate revenues for our firms.
It is simply because established trends tell us that stocks should not be this cheap, especially if earnings are still growing. That is not to say that the index should be at 18,000 by now, but we definitely should not be struggling to stay above 6,000.
Financial market recommendations and comments on InsiderPH News belong solely to the analysts and institutions making them. They do not represent buy, sell or hold recommendations of InsiderPH News. Investments held by analysts or institutions may influence their recommendations. Investors should conduct their own research and carefully evaluate all relevant market information before making investment decisions. As always, the past performance of any investment does not guarantee its price appreciation in the future.
