S&P 500 Strategists as Antsy as Everyone Else on Rest of Year
Strategists evidently think the S&P 500 has found a level where any foreseeable second-half influence is priced in.
(Bloomberg) -- Wall Street strategists, a group not known for their restraint, are no more willing than anyone else to go out on a limb predicting gains or losses in stocks over the second half of 2019.
Among 25 forecasters tracked by Bloomberg, the average call is for the S&P 500 to end 2019 at 2,912, about where it sits now. Despite coming China talks, four more rate decisions and presidential primaries promising to whip up volatility, Wall Street’s paid stock handicappers see the index roughly back where it ended Wednesday.
Strategists evidently think the S&P 500 has found a level where any foreseeable second-half influence is priced in.
“The U.S. is not going to suffer a recession, but the second-round effects of the trade dispute and an unwelcome inventory adjustment alongside lower commodity prices suggests that fiscal year 2019 EPS growth is more likely to be close to zero,” Sean Darby, global equity strategist at Jefferies, said earlier this month.
The good news is strategists aren’t calling for losses following the gauge’s best start to a year since 1998.
The second-quarter earnings season that kicks off in three weeks will probably show a 2.7% decline in profits, the biggest drop since 2016. Going into the reporting period, at least 10 strategists have lowered their year-end profit estimates, though none lowered their price expectations.
Monetary policy may explain the divergence. Optimism that the Fed will start cutting rates, reducing the discount rate and boosting equity valuations, will help the market withstand geopolitical and earnings headwinds if not propel to new highs. At 17.6 times projected earnings, stocks aren’t exactly cheap. But that doesn’t look that expensive compared with yields near the lowest level since 2016.
“We do expect the market to exceed our forecast at some point in the next six months,” said Brian Belski, chief investment strategist at BMO Capital Markets whose 3,000 year-end price target for the S&P is the fourth-highest among 25 strategists. “However, given the current amount of unpredictability in this market and the associated investor doubt, we do not see U.S. stocks making a significant and sustainable move higher that would justify an upward revision at this point.”
To contact the reporter on this story: Elena Popina in New York at epopina@bloomberg.net
To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Chris Nagi, Jeremy Herron
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